THE  JAMES  K.   MOFFITT  FUND. 


LIBRARY  OF  THE  UNIVERSITY  OF  CALIFORNIA. 


GIFT  OF 

JAMES  KENNEDY  MOFFITT 

OF  THE  CLASS  OF  '86. 


,  /&?/. 


Deceived 


Accession  No.7o.£.%£...  -     Class  Mh  ..JW££.B 


THE  SCIENCE  OF  POLITICAL  ECONOMY 


But  let  none  expect  any  great  promotion 
of  the  sciences,  especially  in  their  effective 
part,  unless  natural  philosophy  be  drawn 
out  to  particular  sciences ;  and  again  unless 
these  particular  sciences  be  brought  back 
again  to  natural  philosophy.  From  this  de- 
fect it  is  that  as'ronomy,  optics,  music, 
many  mechanical  arts,  and  what  seems 
stranger,  even  moral  and  civil  philosophy 
and  logic,  rise  but  little  above  their  founda- 
tions, and  only  skim  over  the  varieties  and 
surface  of  things,  viz.,  because  after  these 
particular  sciences  are  formed  and  divided 
off  they  are  no  longer  nourished  by  natural 
philosophy,  which  might  give  them  strength 
and  increase ;  and  therefore  no  wonder  if 
the  sciences  thrive  not  when  separated 
from  their  roots.— Bacon,  Novum  Organum. 


OF  TBB 

TJNIVERSITY 


Take,  since  you  bade  it  should  bear, 
These,  of  the  seed  of  your  sowing — 

Blossom  or  berry  or  weed. 
Sweet  though  they  be  not,  or  fair, 
That  the  dew  of  your  word  kept  growing ; 
Sweet  at  least  was  the  seed. 

—Swinburne  to  Mazzini. 

TO 

AUGUST  LEWIS  OF  NEW  YORK 

AND 
TOM  L.  JOHNSON  OP  CLEVELAND,  OHIO, 

WHO,  OF  THEIR  OWN  MOTION,  AND  WITHOUT  SUGGESTION  OR 
THOUGHT  OF  MINE,   HAVE  HELPED  ME  TO  THE 
LEISURE  NEEDED  TO  WRITE  IT,  I  AFFEC- 
TIONATELY DEDICATE  WHAT  IN 
THIS  SENSE  IS  THEIR 
WORK 


PREFATORY  NOTE. 

work,  begun  in  1891,  after  returning  from  a 
I  lecturing  tour  through  Australia  and  a  trip  around 
the  world,  grew  out  of  the  author's  long-cherished  purpose 
to  write  a  small  text-book,  which  should  present  in  brief 
the  principles  of  a  true  political  economy.  This  "  Primer 
of  Political  Economy  "  was  to  set  forth  in  direct,  didactic 
form  the  main  principles  of  what  he  conceived  to  be  an 
exact  and  indisputable  science,  leaving  controversy  for  a 
later  and  larger  work. 

Before  proceeding  far,  however,  the  author  realized  the 
difficulty  of  making  a  simple  statement  of  principles  while 
there  existed  so  much  confusion  as  to  the  meaning  of 
terms.  He  therefore  felt  impelled  to  change  his  plan,  and 
first  to  present  the  larger  work,  which  should  recast  polit- 
ical economy  and  examine  and  explicate  terminology  as 
well  as  principles ;  and  which,  beginning  at  the  beginning, 
should  trace  the  rise  and  partial  development  of  the  science 
in  the  hands  of  its  founders  a  century  ago,  and  then  show 
its  gradual  emasculation  and  at  last  abandonment  by  its 
professed  teachers— accompanying  this  with  an  account  of 
the  extension  of  the  science  outside  and  independently  of 
the  schools,  in  the  philosophy  of  the  natural  order  now 
spreading  over  the  world  under  the  name  of  the  single  tax. 
Soon  after  this  work  had  got  well  under  way  the  author 
laid  it  aside  to  write  a  brochure  in  reply  to  a  papal  encyc- 
lical ("The  Condition  of  Labor,"  1891),  and  again  later 


vi  PREFATORY  NOTE. 

to  write  a  book  exposing  Mr.  Herbert  Spencer's  recantation 
of  principles  on  the  land  question  ("A  Perplexed  Philoso- 
pher," 1892).  Save  for  these  interruptions,  and  occasional 
newspaper  and  magazine  writing,  and  lecturing  and  polit- 
ical speaking,  he  devoted  himself  continuously  to  his  great 
undertaking  until  he  entered  the  mayoralty  campaign, 
toward  the  close  of  which  death  came,  October  29,  1897. 

"  The  Science  of  Political  Economy/'  if  entirely  finished 
as  planned  by  the  author,  would  have  shown  Book  V.,  on 
Money,  extended,  and  the  nature  and  function  of  the  laws 
of  Wages,  Interest  and  Rent  fully  considered  in  Book  IV. ; 
but  the  work  as  left  was,  in  the  opinion  of  its  author, 
in  its  main  essentials  completed,  the  broken  parts,  to  quote 
his  own  words  a  few  days  before  his  death,  "  indicating 
the  direction  in  which  my  [his]  thought  was  tending." 

The  author's  preface  is  fragmentary.  It  bears  in  the 
manuscript  a  penciled  date,  "March  7,  1894,"  and  is  here 
transcribed  from  a  condensed  writing  used  by  him  in  his 
preliminary  "  roughing-out "  work. 

Aside  from  the  filling  in  of  summaries  in  four  chapter 
headings  (indicated  by  foot-notes),  the  addition  of  an 
index,  and  the  correction  of  a  few  obvious  clerical  errors, 
the  work  is  here  presented  exactly  as  it  was  left  by  the 
author— the  desire  of  those  closest  to  him  being  that  it 
should  be  given  to  the  world  untouched  by  any  other 

hand. 

HENRY  GEORGE,  JR. 

NEW  YORK,  February  1,  1898. 


PREFACE. 

IN  "  Progress  and  Poverty "  I  recast  political  economy 
in  what  were  at  the  time  the  points  which  most  needed 
recasting.  Criticism  has  but  shown  the  soundness  of  the 
views  there  expressed. 

But  "  Progress  and  Poverty n  did  not  cover  the  whole 
field  of  political  economy,  and  was  necessarily  in  large 
measure  of  a  controversial  rather  than  of  a  constructive 
nature.  To  do  more  than  this  was  at  the  time  beyond  the 
leisure  at  my  command.  Nor  did  I  see  fully  the  necessity. 
For  while  I  realized  the  greatness  of  the  forces  which 
would  throw  themselves  against  the  simple  truth  which 
I  endeavored  to  make  clear,  I  did  think  that  should 
"Progress  and  Poverty77  succeed  in  commanding  anything 
like  wide  attention  there  would  be  at  least  some  of  the 
professed  teachers  of  political  economy  who,  recognizing 
the  ignored  truths  which  I  had  endeavored  to  make  clear, 
would  fit  them  in  with  what  of  truth  was  already  under- 
stood and  taught. 

The  years  which  have  elapsed  since  the  publication  of 
"  Progress  and  Poverty 7;  have  been  on  my  part  devoted 
to  the  propagation  of  the  truths  taught  in  "  Progress  and 
Poverty"  by  books,  pamphlets,  magazine  articles,  news- 
paper work,  lectures  and  speeches,  and  have  been  so 
greatly  successful  as  not  only  far  to  exceed  what  fifteen 
years  ago  I  could  have  dared  to  look  forward  to  in  this 
time,  but  to  have  given  me  reason  to  feel  that  of  all  the 


viii  PREFACE. 

men  of  whom  I  have  ever  heard  who  have  attempted  any- 
thing like  so  great  a  work  against  anything  like  so  great 
odds,  I  have  been  in  the  result  of  the  endeavor  to  arouse 
thought  most  favored. 

Not  merely  wherever  the  English  tongue  is  spoken,  but 
in  all  parts  of  the  world,  men  are  arising  who  will  carry 
forward  to  final  triumph  the  great  movement  which  "  Prog- 
ress and  Poverty n  began.  The  great  work  is  not  done, 
but  it  is  commenced,  and  can  never  go  back. 

On  the  night  on  which  I  finished  the  final  chapter  of 
"Progress  and  Poverty"  I  felt  that  the  talent  intrusted 
to  me  had  been  accounted  for— felt  more  fully  satisfied, 
more  deeply  grateful  than  if  all  the  kingdoms  of  the  earth 
had  been  laid  at  my  feet ;  and  though  the  years  have  jus- 
tified, not  dimmed,  my  faith,  there  is  still  left  for  me 
something  to  do. 

But  this  reconstruction  of  political  economy  has  not 
been  done.  So  I  have  thought  it  the  most  useful  thing  I 
could  do  to  drop  as  far  as  I  could  the  work  of  propaganda 
and  the  practical  carrying  forward  of  the  movement  to 
do  this. 


GENERAL  CONTENTS. 


GRAND  DIVISIONS. 

GENERAL  INTRODUCTION. 

BOOK  I.— THE  MEANING  OF  POLITICAL  ECONOMY. 
BOOK  II.— THE  NATURE  OF  WEALTH. 
BOOK  ILL— THE  PRODUCTION  OF  WEALTH. 
BOOK  IV.— THE  DISTRIBUTION  OF  WEALTH. 

BOOK  V.— MONEY— THE  MEDIUM  OF  EXCHANGE  AND  MEA- 
SURE  OF  VALUE. 


SUB-DIVISIONS. 

PAGE 

GENERAL  INTRODUCTION  .  xxix 


BOOK  I. 
THE   MEANING   OF   POLITICAL    ECONOMY. 


INTRODUCTION  TO  BOOK  I. 


CHAPTER  I. 
THE  THREE  FACTORS  OF  THE  WORLD. 

SHOWING  THE  CONSTITUENTS  OF  ALL  WE  PERCEIVE. 

Meaning  of  factor ;  and  of  philosophy ;  and  of  the  world — What 
we  call  spirit — What  we  call  matter — What  we  call  energy — 

ix 


GENERAL  CONTENTS. 

PAGE 

Though  these  three  may  be  at  bottom  one,  we  must  separate 
them  in  thought — Priority  of  spirit 9 


CHAPTER  II. 
MAN,  HIS  PLACE  AND  POWERS. 

SHOWING  OUR  RELATIONS  TO  THE  GLOBE,  AND  THE  QUALITIES 
THAT  ENABLE  US  TO  EXTEND  OUR  KNOWLEDGE  OP  IT  AND  OUR 
POWERS  ON  IT. 

Man's  earliest  knowledge  of  his  habitat — How  that  knowledge 
grows,  and  what  civilized  men  now  know  of  it — The  essential 
distinction  between  man  and  other  animals — In  this  lies  his 
power  of  producing  and  improving 11 


CHAPTER  III. 
HOW  MAN'S  POWERS  ARE  EXTENDED. 

SHOWING  THAT  THEIR  USE   OF  REASON  WELDS  MEN  INTO 
THE  SOCIAL   ORGANISM   OR  ECONOMIC  BODY. 

Extensions  of  man's  powers  in  civilization — Due  not  to  improve- 
ment in  the  individual  but  in  the  society — Hobbes's  "  Levia- 
than " — The  Greater  Leviathan — This  capacity  for  good  also 
capacity  for  evil 19 


CHAPTER  IV. 
CIVILIZATION  — WHAT  IT  MEANS. 

SHOWING  THAT  CIVILIZATION  CONSISTS  IN  THE  WELDING  OF 
MEN  INTO   THE   SOCIAL   ORGANISM   OR  ECONOMIC  BODY. 

Vagueness  as  to  what  civilization  is — Guizot  quoted — Deriva- 
tion and  original  meaning — Civilization  and  the  State — Why 
a  word  referring  to  the  precedent  and  greater  has  been  taken 
from  one  referring  to  the  subsequent  and  lesser  .  .  .24 


CHAPTER  V. 
THE  ORIGIN  AND  GENESIS  OF  CIVILIZATION. 

SHOWING  THE  NATURE  OF  REASON  J  AND  HOW  IT  IMPELS  TO 
EXCHANGE,   BY  WHICH  CIVILIZATION  DEVELOPS. 

Reason  the  power  of  tracing  causal  relations — Analysis  and  syn- 
thesis— Likeness  and  unlikeness  between  man  and  other  ani- 


GENERAL  CONTENTS.  xi 

PAGE 

mals — Powers  that  the  apprehension  of  causal  relations  gives — 
Moral  connotations  of  civilization— But  begins  with  and  in- 
creases through  exchange — Civilization  relative,  and  exists  in 
the  spiritual 29 


CHAPTER  VI. 
OF  KNOWLEDGE  AND  THE  GROWTH  OF  KNOWLEDGE. 

SHOWING  THAT  THE  GROWTH  OP  KNOWLEDGE  IS  BY  COOPER- 
ATION, AND  THAT  IT  INHERES   IN  THE   SOCIETY. 

Civilization  implies  greater  knowledge — This  gain  comes  from 
cooperation — The  incommunicable  knowing  called  skill — The 
communicable  knowing  usually  called  knowledge — The  rela- 
tion of  systematized  knowledge  to  the  means  of  storing  know- 
ledge, to  skill  and  to  the  economic  body — Illustration  from  as- 
tronomy   39 


CHAPTER  VII. 
OF    SEQUENCE,  CONSEQUENCE   AND  LAWS  OF   NATURE. 

SHOWING  THE  PROPER  MEANING  OF  SEQUENCE  AND   OP  CON- 
SEQUENCE, AND  WHY  WE   SPEAK  OP  LAWS  OP  NATURE. 

Coexistence  and  succession — Sequence  and  consequence — Causes 
in  series ;  names  for  them — Our  direct  knowledge  is  of  spirit 
— Simplest  perception  of  causal  relation — Extensions  of  this — 
The  causal  search  unsatisfied  till  it  reaches  spirit — And  finds 
or  assumes  intent — Early  evidences  of  this— Why  we  must 
assume  a  superior  spirit — Evidences  of  intent — The  word 
nature  and  its  implication  of  will  or  spirit — The  word  law — 
The  term  "  law  of  nature ".  .  .44 


CHAPTER  VIH. 
OF  THE  KNOWLEDGE  PROPERLY  CALLED  SCIENCE. 

SHOWING  THAT  SCIENCE  DEALS  ONLY  WITH  LAWS  OP  NATURE, 
AND  THAT  IN  THE  CURRENT  POLITICAL  ECONOMY  THIS  HAS 
BEEN  FORGOTTEN. 

Proper  meaning  of  science — It  investigates  laws  of  nature,  not 
laws  of  man — Distinction  between  the  two — Their  confusion 
in  the  current  political  economy — Mason  and  Lalor's  "  Primer 
of  Political  Economy  "  quoted — Absurdity  of  this  confusion — 
Turgot  on  the  cause  of  such  confusions 58 


xii  GENERAL  CONTENTS. 

CHAPTER  IX. 
THE  ECONOMY  CALLED  POLITICAL  ECONOMY. 

SHOWING  THE  MEANING,    UNITS  AND  SCOPE  OF  POLITICAL 
ECONOMY. 

PAGE 

The  word  economy— The  word  political— Origin  of  the  term 
"political  economy"  and  its  confusions — It  is  not  concerned 
with  the  body  politic,  but  with  the  body  economic — Its  units, 
and  the  system  or  arrangement  of  which  it  treats — Its  scope  .  65 

CHAPTER  X. 
THE  ELEMENTS  OF  POLITICAL  ECONOMY. 

SHOWING  HOW  POLITICAL   ECONOMY  SHOULD   PROCEED  AND 
WHAT  RELATIONS  IT  SEEKS  TO  DISCOVER. 

How  to  understand  a  complex  system — It  is  the  purpose  of  such 
a  system  that  political  economy  seeks  to  discover — These 
laws,  natural  laws  of  human  nature — The  two  elements  rec- 
ognized by  political  economy — These  distinguished  only  by 
reason — Human  will  affects  the  material  world  only  through 
laws  of  nature — It  is  the  active  factor  in  all  with  which  polit- 
ical economy  deals 74 

CHAPTER  XI. 
OF  DESIRES  AND  SATISFACTIONS. 

SHOWING  THE   WIDTH  AND   IMPORTANCE  OF  THE  FIELD   OF 
POLITICAL  ECONOMY. 

Action  springs  from  desire  and  seeks  satisfaction — Order  of  de- 
sires— Wants  or  needs — Subjective  and  objective  desires — 
Material  and  immaterial  desires — The  hierarchy  of  life  and 
of  desires 81 

CHAPTER  XII. 
THE  FUNDAMENTAL  LAW  OF  POLITICAL  ECONOMY. 

SHOWING  THAT  THE  LAW  FROM  WHICH  POLITICAL  ECONOMY  PRO- 
CEEDS IS  THAT  MEN  SEEK  TO  SATISFY  THEIR  DESIRES  WITH 
THE  LEAST  EXERTION. 

Exertion  followed  by  weariness — The  fact  that  men  seek  to  sat- 
isfy their  desires  with  the  least  exertion— Meaning  and  ana- 
logue— Exemplified  in  trivial  things — Is  a  law  of  nature  and 


GENERAL  CONTENTS.  xiii 

PAGE 

the  fundamental  law  of  political  economy — Substitution  of 
selfishness  for  this  principle — Buckle  quoted — Political  econ- 
omy requires  no  such  assumption — The  necessity  of  labor  not 
a  curse 86 

CHAPTER  XIII. 
METHODS  OF  POLITICAL  ECONOMY. 

SHOWING  THE  NATURE  OP  THE  METHODS  OF  INVESTIGATION 
THAT  MAY  BE  USED  IN  POLITICAL  ECONOMY. 

Deductive  and  inductive  schools — "New  American  Cyclopedia" 
quoted — Triumph  of  the  inductionists — The  method  of  in- 
duction and  the  method  of  deduction — Method  of  hypothesis. 
Bacon's  relation  to  induction — Real  error  of  the  deduction- 
ists  and  the  mistake  of  the  inductionists — Lalor's  Cyclopedia 
quoted — Result  of  the  triumph  of  the  inductionists — A  true 
science  of  political  economy  must  follow  the  deductive  method 
— Davis's  "Elements  of  Inductive  Logic"  quoted — Double  as- 
surance of  the  real  postulate  of  political  economy — Method  of 
mental  or  imaginative  experiment  ......  92 

CHAPTER  XIV. 
POLITICAL  ECONOMY  AS  SCIENCE  AND  AS  ART. 

SHOWING  THAT  POLITICAL  ECONOMY  IS  PROPERLY  A  SCIENCE, 
AND  THE  MEANING  IT  SHOULD  HAVE  IF  SPOKEN  OF  AS  ART. 

Science  and  art— There  must  be  a  science  of  political  economy, 
but  no  proper  art — What  must  be  the  aim  of  an  art  of  politi- 
cal economy — White  art  and  black  art — Course  of  further 
investigation 101 


BOOK  II. 
THE  NATURE  OF  WEALTH. 

INTRODUCTION  TO  BOOK  H 115 

CHAPTER  I. 
CONFUSIONS  AS  TO  THE  MEANING  OF  WEALTH. 

SHOWING  THE  FAILURE  OF  THE  CURRENT  POLITICAL  ECONOMY  TO 
DEFINE  WEALTH,  AND  THE  CONFUSIONS  THEREFROM,  CULMI- 
NATING IN  THE  ABANDONMENT  OF  POLITICAL  ECONOMY  BY  ITS 
PROFESSED  TEACHERS. 

Wealth  the  primary  term  of  political  economy— Common  use 
of  the  word — Vagueness  more  obvious  in  political  economy — 


xiv  GENERAL  CONTENTS. 

PAGE 

Adam  Smith  pot  explicit— Increasing  confusion  of  subsequent 
writers — Their  definitions — Many  make  no  attempt  at  defini- 
tion— Perry's  proposition  to  abandon  the  term — Marshall  and 
Nicholson — Failure  to  define  the  term  leads  to  the  abandon- 
ment of  political  economy — This  concealed  under  the  word 
"economic"— The  intent  expressed  by  Macleod— Results  to 
political  economy 117 

CHAPTER  II. 
CAUSES  OF  CONFUSION  AS  TO  THE  MEANING  OF  WEALTH. 

SHOWING    THE    REAL    DIFFICULTY   THAT    BESETS    THE 
ECONOMIC  DEFINITION  OF  WEALTH. 

Effect  of  slavery  on  the  definition  of  wealth — Similar  influences 
now  existing — John  S.  Mill  on  prevalent  delusions — Genesis 
of  the  protective  absurdity — Power  of  special  interests  to 
mold  common  opinion — Of  injustice  and  absurdity,  and  the 
power  of  special  interests  to  pervert  reason — Mill  an  example 
of  how  accepted  opinions  may  blind  men — Effect  upon  a 
philosophical  system  of  the  acceptance  of  an  incongruity — 
Meaning  of  a  saying  of  Christ — Influence  of  a  class  profiting 
by  robbery  shown  in  the  development  of  political  economy — 
Archbishop  Whately  puts  the  cart  before  the  horse — The  power 
of  a  great  pecuniary  interest  to  affect  thought  can  be  ended  only 
by  abolishing  that  interest— This  shown  in  American  slavery  .  131 


CHAPTER  III. 
WHAT  ADAM  SMITH  MEANT  BY  WEALTH. 

SHOWING  HOW  ESSENTIALLY  ADAM  SMITH'S  PRIMARY  CONCEPTION 
OF  WEALTH  DIFFERED  FROM  THAT  NOW  HELD  BY  HIS  SUCCES- 
SORS. 

Significance  of  the  title  "  Wealth  of  Nations" — Its  origin  shown 
in  Smith's  reference  to  the  Physiocrats — His  conception  of 
wealth  in  his  introduction — Objection  by  Malthus  and  by  Mac- 
leod— Smith's  primary  conception  that  given  in  "  Progress  and 
Poverty ;; — His  subsequent  confusions 143 

CHAPTER  IV. 
THE  FRENCH  PHYSIOCRATS. 

SHOWING  WHO  THE  FIRST  DEVELOPERS  OF  A  TRUE    SCIENCE 
OF  POLITICAL  ECONOMY  WERE,  AND  WHAT  THEY  HELD. 

Quesnay  and  his  followers— The  great  truths  they  grasped  and 
the  cause  of  the  confusion  into  which  they  fell — This  used  to 
discredit  their  whole  system,  but  not  really  vital— They  were 


GENERAL  CONTENTS.  xv 

PAGE 

real  free  traders — The  scant  justice  yet  done  them— Reference 
to  them  in  "  Progress  and  Poverty  "—  Macleod's  statement  of 
their  doctrine  of  natural  order — Their  conception  of  wealth — 
Their  day  of  hope  and  their  fall 148 


CHAPTER  V. 
ADAM  SMITH  AND  THE  PHYSIOCRATS. 

SHOWING  THE  RELATION   BETWEEN  ADAM   SMITH  AND  THE 
PHYSIOCRATS. 

Smith  and  Quesnay — The  "  Wealth  of  Nations  "  and  Physiocratic 
ideas — Smith's  criticism  of  the  Physiocrats — His  failure  to  ap- 
preciate the  single  tax — His  prudence 160 

CHAPTER  VI. 
SMITH'S  INFLUENCE   ON  POLITICAL  ECONOMY. 

SHOWING  WHAT  THE  "  WEALTH  OF  NATIONS"  ACCOMPLISHED 
AND  THE  COURSE  OF  THE  SUBSEQUENT  DEVELOPMENT  OF  PO- 
LITICAL ECONOMY. 

Smith,  a  philosopher,  who  addressed  the  cultured,  and  whose  at- 
tack on  mercantilism  rather  found  favor  with  the  powerful  land- 
owners— Not  entirely  exempt  from  suspicion  of  radicalism,  yet 
pardoned  for  his  affiliation  with  the  Physiocrats — Efforts  of 
Malthus  and  Ricardo  on  respectabilizing  the  science — The  fight 
against  the  corn-laws  revealed  the  true  beneficiaries  of  protec- 
tion, but  passed  for  a  free-trade  victory,  and  much  strength- 
ened the  incoherent  science — Confidence  of  its  scholastic  ad- 
vocates— Say's  belief  in  the  result  of  the  colleges  taking  up 
political  economy — Torrens's  confidence — Failure  of  other 
countries  to  follow  England's  example — Cairnes  doubts  the 
effect  of  making  it  a  scholastic  study — His  sagacity  proved 
by  the  subsequent  breakdown  of  Smith's  economy — The  true 
reason 170 

CHAPTER  VH. 

INEFFECTUAL   GROPINGS    TOWARD   A   DETERMINA- 
TION OF  WEALTH. 

SHOWING  THE  OPPOSITION  TO  THE  SCHOLASTIC  ECONOMY 
BEFORE  "PROGRESS  AND  POVERTY." 

Illogical  character  of  the  "  Wealth  of  Nations  "—Statements  of 
natural  right — Spence,  Ogilvie,  Chalmers,  Wakefield,  Spencer, 
Dove,  Bisset — Vague  recognitions  of  natural  right — Protec- 
tion gave  rise  to  no  political  economy  in  England,  but  did  else- 


xvi  GENERAL  CONTENTS. 

PAGE 

where — Germany  and  protectionist  political  economy  in  the 
United  States— Divergence  of  the  schools — Trade-unionism 
in  socialism 182 

CHAPTER  Vin. 
BREAKDOWN  OF  SCHOLASTIC  POLITICAL  ECONOMY. 

SHOWING  THE  REASON,  THE  RECEPTION,  AND  EFFECT  ON  PO- 
LITICAL ECONOMY  OP  "PROGRESS  AND  POVERTY." 

"  Progress  and  Poverty" — Preference  of  professors  to  abandon 
the  "  science  "  rather  than  radically  change  it,  brings  the  break- 
down of  scholastic  economy— The  "Encyclopaedia  Britannica" 
— The  "Austrian  school"  that  has  succeeded  the  "classical"  200 

CHAPTER  IX. 
WEALTH  AND  VALUE. 

SHOWING  THE  REASON  FOR  CONSIDERING  THE  NATURE  OF 
VALUE  BEFORE  THAT   OF  WEALTH. 

The  point  of  agreement  as  to  wealth — Advantages  of  proceeding 
from  this  point 210 

CHAPTER  X. 
VALUE  IN  USE  AND  VALUE  IN  EXCHANGE. 

SHOWING  THE  TWO  SENSES  OP  VALUE;  HOW  THE  DISTINCTION 
HAS  BEEN  IGNORED,  AND  ITS  REAL  VALIDITY ;  AND  THE  REASON 
FOR  CONFINING  THE  ECONOMIC  TERM  TO  ONE  SENSE. 

Importance  of  the  term  value — Original  meaning  of  the  word — 
Its  two  senses — Names  for  them  adopted  by  Smith — Utility 
and  desirability — Mill's  criticism  of  Smi  h — Complete  ignor- 
ing of  the  distinction  by  the  Austrian  school — Cause  of  this 
confusion — Capability  of  use  not  usefulness — Smith's  distinc- 
tion a  real  one — The  dual  use  of  one  word  in  common  speech 
must  be  avoided  in  political  economy — Intrinsic  value  .  .  212 

CHAPTER  XI. 

ECONOMIC  VALUE—ITS  REAL  MEANING  AND  FINAL 
MEASURE. 

SHOWING  HOW  VALUE  IN  EXCHANGE  HAS  BEEN  DEEMED  A  RELATION 
OP  PROPORTION ;  AND  THE  AMBIGUITY  WHICH  HAS  LED  TO  THIS. 

The  conception  of  value  as  a  relation  of  proportion — It  is  really 
a  relation  to  exertion — Adam  Smith's  perception  of  this — His 
reasons  for  accepting  the  term  value  in  exchange — His  con- 
fusion and  that  of  his  successors 226 


GENERAL  CONTENTS.  xvii 

CHAPTER  XII. 
VALUE  IN  EXCHANGE  REALLY  RELATED  TO  LABOR. 

SHOWING  THAT  VALUE  DOES  NOT  COME  FROM  EXCHANGEABILITY, 
BUT  EXCHANGEABILITY  FROM  VALUE,  WHICH  IS  AN  EXPRESSION 
OF  THE  SAVING  OF  LABOR  INVOLVED  IN  POSSESSION. 

PAGE 

Root  of  the  assumption  that  the  sum  of  values  cannot  increase 
or  diminish — The  fundamental  idea  of  proportion — We  can- 
not really  think  of  value  in  this  way — The  confusion  that 
makes  us  imagine  that  we  do — The  tacit  assumption  and  re- 
luctance to  examine  that  bolster  the  current  notion — Imagina- 
tive experiment  shows  that  value  is  related  to  labor— Common 
facts  that  prove  this — Current  assumption  a  fallacy  of  undis- 
tributed middle — Various  senses  of  "  labor" — Exertion  positive 
and  exertion  negative — Re-statement  of  the  proposition  as  to 
value — Of  desire  and  its  measurement— Causal  relationship  of 
value  and  exchangeability — Imaginative  experiment  showing 
that  value  may  exist  where  exchange  is  impossible — Value  and 
expression  of  exertion  avoided 235 

CHAPTER  XIH. 
THE  DENOMINATOR  OF  VALUE. 

SHOWING  WHAT  VALUE  IS,  AND  ITS  RELATIONS. 

What  value  is — The  test  of  real  value — Value  related  only  to 
human  desire — This  perception  at  the  bottom  of  the  Austrian 
school— But  its  measure  must  be  objective — How  cost  of 
production  acts  as  a  measure  of  value — Desire  for  similar 
things  and  for  essential  things — Application  of  this  principle — 
Its  relation  to  land  values 250 

CHAPTER  XIV. 
THE  TWO  SOURCES  OF  VALUE. 

SHOWING  THAT  THERE  IS  A  VALUE  FROM  PRODUCTION  AND 
ALSO  A  VALUE  FROM  OBLIGATION. 

Value  does  not  involve  increase  of  wealth — Value  of  obligation 
— Of  enslavement — Economic  definition  of  wealth  impossible 
without  recognition  of  this  difference  in  value— Smith's  con- 
fusion and  results — Necessity  of  the  distinction — Value  from 
production  and  value  from  obligation — Either  gives  the  essen- 
tial quality  of  commanding  exertion — The  obligation  of  debt — 
Other  obligations — Land  values  most  important  of  all  forms 
of  value  from  obligation — Property  in  land  equivalent  to 
property  in  men — Common  meaning  of  value  in  exchange — 
Real  relation  with  exertion — Ultimate  exchangeability  is  for 
labor— Adam  Smith  right — Light  thrown  by  this  theory  of 
value  .  .  257 


xviii  GENERAL  CONTENTS. 

CHAPTER  XV. 
THE  MEANING  OF  WEALTH  IN  POLITICAL  ECONOMY. 

SHOWING  HOW  VALUE  FROM  PRODUCTION  IS  WEALTH  IN 
POLITICAL  ECONOMY. 

PAGE 

Wealth  as  fixed  in  "Progress  and  Poverty" — Course  of  the 
scholastic  political  economy — The  reverse  method  of  this  work 
— The  conclusion  the  same — Reason  of  the  disposition  to  in- 
clude all  value  as  wealth — Metaphorical  meanings — Bull  and 
pun — Metaphorical  meaning  of  wealth — Its  core  meaning — Its 
use  to  express  exchangeability — Similar  use  of  money — Ordi- 
nary core  meaning  the  proper  meaning  of  wealth — Its  use  in 
individual  economy  and  in  political  economy— What  is  meant 
by  increase  of  wealth — Wealth  and  labor — Its  factors  nature 
and  man — Wealth  their  resultant — Of  Adam  Smith — Danger 
of  carrying  into  political  economy  a  meaning  proper  in  indi- 
vidual economy — Example  of  "  money  "— "  Actual  wealth  n  and 
"relative  wealth"— " Value  from  production"  and  "value 
from  obligation  " — The  English  tongue  has  no  single  word  for 
an  article  of  wealth— Of  "  commodities  "—Of  "goods"— Why 
there  is  no  singular  in  English — The  attempt  to  form  one  by 
dropping  the  "  s "  and  Anglo-German  jargon  .  .  .  .270 

CHAPTER  XVI. 
THE  GENESIS  OF  WEALTH. 

SHOWING  HOW   WEALTH   ORIGINATES   AND  WHAT   IT   ESSEN- 
TIALLY IS. 

Reason  of  this  inquiry — Wealth  proceeds  from  exertion  prompted 
by  desire,  but  all  exertion  does  not  result  in  wealth — Simple 
examples  of  action,  and  of  action  resulting  in  wealth — "Rid- 
ing and  tying"— Sub-divisions  of  effort  resulting  in  increments 
of  wealth — Wealth  essentially  a  stored  and  transferable  ser- 
vice—Of transferable  service — The  action  of  reason  as  natural, 
though  not  as  certain  and  quick  as  that  of  instinct — Wealth 
is  service  impressed  on  matter — Must  be  objective  and  have 
tangible  form 285 

CHAPTER  XVII. 
THE  WEALTH  THAT  IS  CALLED  CAPITAL. 

SHOWING  WHAT  THE  WEALTH  CALLED   CAPITAL  REALLY  IS. 

Capital  is  a  part  of  wealth  used  indirectly  to  satisfy  desire- 
Simple  illustration  of  fruit — Wealth  permits  storage  of  labor — 
The  bull  and  the  man — Exertion  and  its  higher  powers — Per- 


GENERAL  CONTENTS.  xix 

PAGE 

sonal  qualities  cannot  really  be  wealth  or  capital — The  taboo 
and  its  modern  form — Common  opinion  of  wealth  and  capital  293 


CHAPTER  XVIII. 
WHY  POLITICAL  ECONOMY  CONSIDERS  ONLY  WEALTH. 

SHOWING  THAT  POLITICAL  ECONOMY,  AS  PROPERLY  STATED, 
COVERS  ALL  THE  RELATIONS  OF  MEN  IN  SOCIETY  INTO  WHICH 
IT  IS  NECESSARY  TO  INQUIRE. 

Political  economy  does  not  include  all  the  exertions  for  the 
satisfaction  o*  material  desires ;  but  it  does  include  the  greater 
part  of  them,  and  it  is  through  value  that  the  exchange  of 
services  for  services  is  made — Its  duty  and  province  .  .  301 

CHAPTER  XIX. 
MORAL  CONFUSIONS  AS  TO  WEALTH. 

SHOWING  HOW  RICH  AND   POOR  ARE  CORRELATIVES,   AND 
WHY  CHRIST   SYMPATHIZED   WITH  THE   POOR. 

The  legitimacy  of  wealth  and  the  disposition  to  regard  it  as 
sordid  and  mean — The  really  rich  and  the  really  poor — They 
are  really  correlatives — The  good  sense  of  Christ's  teaching  .  304 


CHAPTER  XX. 
OF  THE  PERMANENCE  OF  WEALTH. 

SHOWING  THAT  VALUES  FROM  OBLIGATION  SEEM  REALLY  TO 
LAST  LONGER  THAN  VALUES  FROM  PRODUCTION. 

Value  from  production  and  value  from  obligation — The  one 
material  and  the  other  existing  in  the  spiritual — Superior 
permanence  of  the  spiritual — Shakespeare's  boast — Maecenas's 
buildings  and  Horace's  odes — The  two  values  now  existing — 
Franchises  and  land  values  last  longer  than  gold  and  gems — 
Destruction  in  social  advance — Conclusions  from  all  this  .  308 


CHAPTER  XXI. 
THE  RELATION  OF  MONEY  TO  WEALTH. 

SHOWING  THAT  SOME  MONEY  IS  AND  SOME  MONEY  IS  NOT 
WEALTH. 

Where  I  shall  treat  of  money— No  categorical  answer  can  yet 
be  given  to  the  question  whether  money  is  wealth — Some 
money  is  and  some  is  not. wealth 313 


xx  GENERAL  CONTENTS. 

BOOK  III. 
THE  PRODUCTION  OF  WEALTH. 


CHAPTER  I. 
THE  MEANING   OF  PRODUCTION. 

SHOWING  THE  MEANING  AND  PROPER  USE  OF  PRODUCTION. 

PAGE 

Production  a  drawing  forth  of  what  before  exists—Its  difference 
from  creation — Production  other  than  of  wealth— Includes 
all  stages  of  bringing  to  be— Mistakes  as  to  it  .  .  .  323 

CHAPTER  II. 
THE  THREE  MODES  OF  PRODUCTION. 

SHOWING  THE  COMMON  CHARACTER,  YET  DIFFERENT  MODES 
OF  PRODUCTION. 

Production  involves  change,  brought  about  by  conscious  will — 
Its  three  modes :  (1)  adapting,  (2)  growing,  (3)  exchanging— 
This  the  natural  order  of  these  modes 327 

CHAPTER  III. 
POPULATION  AND  SUBSISTENCE. 

SHOWING  THAT  THE  THEORY  OF  A  TENDENCY  IN  POPULATION  TO 
INCREASE  FASTER  THAN  SUBSISTENCE  HAS  PREVIOUSLY  BEEN 
EXAMINED  AND  CONDEMNED. 

The  Malthusian  theory— Discussed  in  "Progress  and  Poverty"  .  333 


CHAPTER  IV. 

THE  ALLEGED  LAW  OF  DIMINISHING  RETURNS 
IN  AGRICULTURE. 

SHOWING  WHAT  THIS  ALLEGED  LAW  IS. 

John  Stuart  Mill  quoted  as  to  the  importance,  relations  and 
nature  of  this  law — The  reductio  ad  dbsurdum  by  which  it 
is  proved — Contention  that  it  is  a  misapprehension  of  the  uni- 
versal law  of  space  „ 335 


GENERAL  CONTENTS.  xxi 


CHAPTER  V. 
OF  SPACE  AND  TIME. 

SHOWING  THAT  HUMAN  REASON  IS  ONE,  AND  SO  PAR  AS  IT 
CAN   GO  MAY  BE  RELIED   ON. 

Purpose  of  this  work — Of  metaphysics — Danger  of  thinking  of 
words  as  things — Space  and  time  not  conceptions  of  things, 
but  of  relations  of  things — They  cannot,  therefore,  have 
independent  beginning  or  ending — The  verbal  habit  which 
favors  this  idea — How  favored  by  poets  and  by  religious 
teachers — How  favored  by  philosophers — Of  Kant — Of  Scho- 
penhauer— Mysteries  and  antinomies  that  are  really  confusions 
in  the  meaning  of  words — Human  reason  and  the  eternal  reason 
— Philosophers  who  are  really  word-jugglers  ....  339 


CHAPTER  VI. 

CONFUSION  OF  THE  SPACIAL  LAW  WITH  AGRI- 
CULTURE. 

SHOWING  THE  GENESIS   OF  THIS  CONFUSION. 

What  space  is — The  place  to  which  man  is  confined — Extension 
a  part  of  the  concept,  land — Perception  is  by  contrast — Man's 
first  use  of  land  is  by  the  mode  of  adapting — His  second,  and 
for  a  long  time  most  important,  use  is  by  growing — The  third, 
on  which  civilization  is  now  entering,  is  exchanging — Political 
economy  began  in  the  second,  and  growing  still  attracts  most 
attention — The  truth  and  error  of  the  Physiocrats — The  suc- 
cessors of  Smith,  while  avoiding  the  error  of  the  Physiocrats, 
also  ignored  their  truth ;  and  with  their  acceptance  of  the  Mal- 
thusian  theory,  and  Ricardo's  explanation  of  rent  as  relating 
to  agricultural  land,  they  fell  into,  and  have  continued  the 
habit  of  treating  land  and  rent  as  agricultural — Difficulty  of 
the  single  tax  in  the  United  States 351 

CHAPTER  VII. 
THE  RELATION  OF  SPACE  IN  PRODUCTION. 

SHOWING  THAT  SPACE  HAS  RELATION  TO  ALL  MODES  OF 
PRODUCTION. 

Matter  being  material,  space  must  have  relation  to  all  produc- 
tion—This relation  readily  seen  in  agriculture — The  concen- 
tration of  labor  in  agriculture  tends  up  to  a  certain  point  to 
increase  and  then  to  diminish  production — But  it  is  a  mis- 
apprehension to  attribute  this  law  to  agriculture  or  to  the 
mode  of  growing — It  holds  in  all  modes  and  sub-divisions  of 


xxii  GENERAL  CONTENTS. 

PAGB 

these  modes — Instances :  of  the  production  of  brick,  of  the  mere 
storage  of  brick — Man  himself  requires  space — The  division  of 
labor  as  requiring  space — Intensive  and  extensive  use  of  land  357 

CHAPTER  VIII. 
THE   RELATION  OF  TIME  IN  PRODUCTION. 

SHOWING  THAT  ALL  MODES  OF  PRODUCTION  HAVE  RELATION 
TO  TIME. 

Difference  between  apprehensions  of  space  and  time,  the  one 
objective,  the  other  subjective — Of  spirits  and  of  creation — 
All  production  requires  time— The  concentration  of  labor  in 
time 365 

CHAPTER  IX. 
COOPERATION  — ITS  TWO  WAYS. 

SHOWING  THE  TWO  WAYS  OF  COOPERATION. 

Cooperation  is  the  union  of  individual  powers  in  the  attainment 
of  common  ends — Its  ways  and  their  analogues :  (1)  the  com- 
bination of  effort ;  (2)  the  separation  of  effort — Illustrations : 
of  building  houses,  of  joint-stock  companies,  etc. — Of  sailing  a 
boat — The  principle  shown  in  naval  architecture— The  Erie 
Canal — The  baking  of  bread — Production  requires  conscious 
thought — The  same  principle  in  mental  effort— What  is  on 
the  one  side  separation  is  on  the  other  concentration — Extent 
of  concentration  and  specialization  of  work  in  modern  civiliza- 
tion— The  principle  of  the  machine — Beginning  and  increase 
of  division  of  labor — Adam  Smith's  three  heads — A  better 
analysis. 371 

CHAPTER  X. 
COOPERATION  — ITS  TWO  KINDS. 

SHOWING  THE  TWO  KINDS  OF  COOPERATION,  AND  HOW  THE 
POWER  OF  THE  ONE  GREATLY  EXCEEDS  THAT  OF  THE  OTHER. 

The  kind  of  cooperation  which,  as  to  method  of  union  or  how  of 
initiation,  results  from  without  and  may  be  called  directed 
or  conscious  cooperation — Another  proceeding  from  within 
which  may  be  called  spontaneous  or  unconscious  cooperation 
— Types  of  the  two  kinds  and  their  analogues — Tacking  of  a 
full-rigged  ship  and  of  a  bird — Intelligence  that  suffices  for 
the  one  impossible  for  the  other — The  savage  and  the  ship — 
Unconscious  cooperation  required  in  ship-building — Conscious 
cooperation  will  not  suffice  for  the  work  of  unconscious — The 
fatal  defect  of  socialism — The  reason  of  this  is  that  the  power 
of  thought  is  spiritual  and  cannot  be  fused  as  can  physical 


GENERAL  CONTENTS.  xxiii 

PAGE 

force — Of  "man  power  "and  "mind  power" — Illustration  from 
the  optician — Impossibility  of  socialism — Society  a  Leviathan 
greater  than  that  of  Hobbes 382 

CHAPTER  XI. 
THE  OFFICE  OF  EXCHANGE  IN  PRODUCTION. 

SHOWING  THAT  IN  MAN  THE  LACK  OF  INSTINCT  IS  SUPPLIED 
BY  THE  HIGHER  QUALITY  OF  REASON,  WHICH  LEADS  TO  EX- 
CHANGE. 

The  cooperation  of  ants  and  bees  is  from  within  and  not  from 
without ;  from  instinct  and  not  from  direction — Man  has  little 
instinct ;  but  the  want  supplied  by  reason — Reason  shows 
itself  in  exchange — This  suffices  for  the  unconscious  coopera- 
tion of  the  economic  body  or  Greater  Leviathan — Of  the  three 
modes  of  production,  exchanging  is  the  highest — Mistake  of 
writers  on  political  economy — The  motive  of  exchange  .  .  397 


CHAPTER  XH. 
OFFICE  OF  COMPETITION  IN  PRODUCTION. 

SHOWING  THAT  COMPETITION  BRINGS  TRADE,  AND  CONSE- 
QUENTLY SERVICE,  TO   ITS  JUST  LEVEL. 

"Competition  is  the  life  of  trade,"  an  old  and  true  adage — The 
assumption  that  it  is  an  evil  springs  from  two  causes — one 
bad,  the  other  good — The  bad  cause  at  the  root  of  protection- 
ism— Law  of  competition  a  natural  law — Competition  neces- 
sary to  civilization 402 

CHAPTER  XIII. 
OF  DEMAND  AND  SUPPLY  IN  PRODUCTION      .  404 

CHAPTER  XIV. 
ORDER  OF  THE  THREE  FACTORS  OF  PRODUCTION. 

SHOWING  THE  AGREEMENT  OF  ALL  ECONOMISTS  AS  TO  THE 
NAMES  AND  ORDER  OF  THE  FACTORS  OF  PRODUCTION. 

Land  and  labor  necessary  elements  in  production — Union  of  a 
composite  element,  capital — Reason  for  dwelling  on  this  agree- 
ment as  to  order 405 

CHAPTER  XV. 
THE  FIRST  FACTOR  OF  PRODUCTION— LAND. 

SHOWING  THAT  LAND   IS  THE  NATURAL  OR  PASSIVE  FACTOR 
IN  ALL  PRODUCTION. 

The  term  land— Landowners — Labor  the  only  active  factor        ,  408 


xxiv  GENERAL  CONTENTS. 


CHAPTER  XVI. 
THE  SECOND  FACTOR  OF  PRODUCTION— LABOR. 

SHOWING  THAT  LABOR  IS  THE  HUMAN  OR  ACTIVE  FACTOR 
IN  ALL  PRODUCTION. 

PAGE 

The  term  labor — It  is  the  only  active  factor  in  producing  wealth, 
and  by  nature  spiritual 411 

CHAPTER  XVII. 
THE  THIRD  FACTOR  OF  PRODUCTION— CAPITAL. 

SHOWING  THAT  CAPITAL  IS  NOT  A  PRIMARY  FACTOR,  BUT  PROCEEDS 
FROM  LAND  AND  LABOR,  AND  IS  A  FORM  OR  USE  OF  WEALTH. 

Capital  is  essentially  labor  raised  to  a  higher  power — Where  it 
may,  and  where  it  must  aid  labor — In  itself  it  is  helpless         .  413 


BOOK  IV. 
THE  DISTRIBUTION  OF  WEALTH. 

INTRODUCTION  TO  BOOK  IV 421 

CHAPTER  I. 
THE  MEANING  OF  DISTRIBUTION. 

SHOWING  THE  MEANING  AND  USES  OF  THE  WORD  DISTRIBUTION ; 
THE  PLACE  AND  MEANING  OF  THE  ECONOMIC  TERM  ;  AND  THAT 
IT  IS  CONCERNED  ONLY  WITH  NATURAL  LAWS. 

Derivation  and  uses  of  the  word — Exchange,  consumption  and 
taxation  not  proper  divisions  of  political  economy — Need  of  a 
consideration  of  distribution — It  is  the  continuation  and  end 
of  what  begins  in  production,  and  thus  the  final  division  of 
political  economy — The  meaning  usually  assigned  to  distribu- 
tion as  an  economic  term,  and  its  true  meaning  .  .  .  423 

CHAPTER  II. 
THE  NATURE  OF  DISTRIBUTION. 

SHOWING  THE  FALLACY  OF  THE  CONTENTION  THAT  DISTRIBUTION 
IS  A  MATTER  OF  HUMAN  LAW;  THAT  THE  NATURAL  LAWS  OF 
DISTRIBUTION  ARE  MANIFEST  NOT  ON  WEALTH  ALREADY  PRO- 
DUCED, BUT  ON  SUBSEQUENT  PRODUCTION  J  AND  THAT  THEY  ARE 
MORAL  LAWS. 

John  Stuart  Mill's  argument  that  distribution  is  a  matter  of  hu- 
man law — Its  evidence  of  the  unscientific  character  of  the 


GENERAL  CONTENTS.  xxv 

PAGE 

scholastic  economy — The  fallacy  it  involves  and  the  confusion 
it  shows — Illustration  from  Bedouin  and  from  civilized  society 
— Natural  laws  of  distribution  do  not  act  upon  wealth  already 
produced,  but  on  future  production — Reason  of  this — Illustra- 
tion of  siphon  and  analogy  of  blood 430 

CHAPTER  HI. 

THE  COMMON  PERCEPTION  OF  NATURAL  LAW  IN 
DISTRIBUTION. 

SHOWING    THE    COMMON  AND   INERADICABLE  PERCEPTION   OF 
NATURAL   LAWS   OF   DISTRIBUTION. 

Mill's  admission  of  natural  law  in  his  argument  that  distribution 
is  a  matter  of  human  law — Sequence  and  consequence— Human 
will  and  the  will  manifest  in  nature — Inflexibility  of  natural 
laws  of  distribution — Human  will  powerless  to  affect  distribu- 
tion— This  shown  by  attempts  to  affect  distribution  through 
restriction  of  production — Mill's  confusion  and  his  high  char- 
acter   440 

CHAPTER  IV. 

THE  REAL  DIFFERENCE  BETWEEN  LAWS  OF 
PRODUCTION  AND  OF  DISTRIBUTION. 

SHOWING  THAT   DISTRIBUTION   HAS  REFERENCE  TO  ETHICS, 
WHILE   PRODUCTION   HAS  NOT. 

The  laws  of  production  are  physical  laws ;  the  laws  of  distribu- 
tion moral  laws,  concerned  only  with  spirit — This  the  reason 
why  the  immutable  character  of  the  laws  of  distribution  is  more 
quickly  and  clearly  recognized 450 

CHAPTER  V. 
OF  PROPERTY. 

SHOWING  THAT  PROPERTY  DEPENDS  UPON  NATURAL  LAW. 

The  law  of  distribution  must  be  the  law  which  determines  owner- 
ship— John  Stuart  Mill  recognizes  this ;  but  extending  his  error, 
treats  property  as  a  matter  of  human  institution  solely — His 
assertion  quoted  and  examined — His  utilitarianism — His 
further  contradictions 454 

CHAPTER  VI. 
CAUSE  OF  CONFUSION  AS  TO  PROPERTY. 

SHOWING  WHY  AND  HOW  POLITICAL  ECONOMISTS  FELL  INTO 
SUCH  CONFUSIONS  WITH  REGARD  TO  PROPERTY. 

Mill  blinded  by  the  pre-assumption  that  land  is  property — He  all 
but  states  later  the  true  principle  of  property,  but  recovers  by 


xxvi  GENERAL  CONTENTS. 

PAGE 

substituting  in  place  of  the  economic  term  "  land, "  the  word  in 
its  colloquial  use — The  different  senses  of  the  word  illustrated 
from  the  shore  of  New  York  harbor — Mill  attempts  to  justify 
property  in  land,  but  succeeds  only  in  justifying  property  in 
wealth .  460 


BOOK  V. 

MONEY— THE  MEDIUM  OF  EXCHANGE  AND 
MEASURE  OF  VALUE. 

INTRODUCTION  TO  BOOK  V 477 

CHAPTER  I. 
CONFUSIONS  AS  TO  MONEY. 

SHOWING  THE  DIVERGENCE  IN  COMMON  THOUGHT  AND  AMONG 
ECONOMISTS  AS   TO   MONEY. 

Present  confusions  as  to  money — Their  cause — How  to  disen- 
tangle them  ..........  479 

CHAPTER  II. 
THE  COMMON  UNDERSTANDING  OF  MONEY. 

SHOWING  THAT  THE  COMMON  USE  OF  MONEY  IS  TO  BUY  THINGS 
WITH,  AND  THAT  ITS  ESSENTIAL  CHARACTER  IS  NOT  IN  ITS  MA- 
TERIAL, BUT  IN  ITS  USE. 

The  use  of  money  to  exchange  for  other  things — Buying  and  sell- 
ing— Illustration  of  the  travelers — Money  not  more  valuable 
than  other  things,  but  more  readily  exchangeable — Exchanges 
with  out  money — Checks,  etc.,  not  money — Different  money  in 
different  countries — But  money  not  made  by  government  fiat — 
Does  not  necessarily  consist  of  gold  and  silver — Or  need  intrin- 
sic value — Its  essential  quality  and  definition  ....  482 

CHAPTER  III. 
MEDIUM  OF  EXCHANGE  AND  MEASURE  OF  VALUE. 

SHOWING  HOW  THE  COMMON  MEDIUM  OF  EXCHANGE  BECOMES  THE 
COMMON  MEASURE  OF  VALUE,  AND  WHY  WE  CANNOT  FIND  A  COM- 
MON MEASURE  IN  LABOR. 

Money  is  most  exchanged — Why  not  measure  value  by  labor? 
— Smith's  unsatisfactory  answer — The  true  answer — Labor  can 
afford  no  common  measure,  and  commodities  are  preferably 


GENERAL  CONTENTS.  xxvii 

PAGE 

taken — Survivals  of  common  measures — Difference  in  common 
measures  does  not  prevent  exchange        .        .        .        .        .  495 

CHAPTER  IV. 
THE  OFFICE  OF   CREDIT  IN  EXCHANGES. 

SHOWING  THAT  THE  ADVANCE  OF  CIVILIZATION  ECONOMIZES 
THE   USE   OF  MONEY. 

Tendency  to  over-estimate  the  importance  of  money — Credit 
existed  before  the  use  of  money  began — And  it  is  now  and 
always  has  been  the  most  important  instrument  of  exchange — 
Illustration  of  shipwrecked  men — Adam  Smith's  error  as  to 
barter — Money's  most  important  use  to-day  is  as  a  measure  of 
value 504 

CHAPTER  V. 
THE   GENESIS  OF  MONEY. 

SHOWING  THAT  THE  LAW  OF  GRATIFYING  DESIRES  WITH  THE 
LEAST  EXERTION  PROMPTS  THE  USE  FROM  TIME  TO  TIME  OF 
THE  MOST  LABOR-SAVING  MEDIUM  AVAILABLE. 

Money  not  an  invention,  but  developed  by  civilization — It  grows 
with  the  growth  of  exchanges — Exchange  first  of  general  com- 
modities— Then  of  the  more  convenient  commodities — Then 
of  coin,  whose  commodity  value  comes  to  be  forgotten — Illus- 
tration of  the  American  trade  dollar — The  lessening  uses  of 
commodity  money  and  extensions  of  credit  money — Two  ele- 
ments in  exchange  value  of  metal  coin :  intrinsic,  or  value  of 
the  metal  itself ;  and  seigniorage — Meaning  of  seigniorage — 
Exchange  value  of  paper  money  is  seigniorage — Use  of  money 
is  not  for  consumption,  but  exchange — Proprietary  articles  as 
mediums  of  exchange — Mutilated  coins — When  lessening  metal 
value  in  coins  does  not  lessen  circulating  value — The  essential 
being  that  both  represent  the  same  exertion — This  the  reason 
why  paper  money  exchanges  equally  with  metal  money  of  like 
denomination 512 

CHAPTER  VI. 
THE  TWO  KINDS  OF  MONEY. 

SHOWING   THAT    ONE    ORIGINATES   IN  VALUE    FROM   PRODUC- 
TION AND   THE   OTHER  IN  VALUE  FROM  OBLIGATION. 

Money  peculiarly  the  representative  of  value — Two  kinds  of 
money  in  the  more  highly  civilized  world — Commodity  money 
and  value  from  production— Credit  money  and  value  from  obli- 
gation— Of  credit  money — Of  commodity  money — Of  intrinsic 
value — Gold  coin  the  only  intrinsic  value  money  now  in  cir- 
culation in  the  United  States,  England,  France  or  Germany  526 


GENERAL  INTRODUCTION 


For  tho'  the  Giant  Ages  heave  the  hill 
And  break  the  shore,  and  evermore 

Make  and  break,  and  work  their  will ; 
Tho'  world  on  world  in  myriad  myriads  roll 

Bound  us,  each  with  different  powers 

And  other  forms  of  life  than  ours, 
What  know  we  greater  than  the  soul? 
— Tennyson. 


GENERAL  INTRODUCTION. 

REASON  OF  THIS  WOEK. 

I  SHALL  try  in  this  work  to  put  in  clear  and  systematic 
form  the  main  principles  of  political  economy. 

The  place  I  would  take  is  not  that  of  a  teacher,  who 
states  what  is  to  be  believed,  but  rather  that  of  a  guide, 
who  points  out  what  by  looking  is  to  be  seen.  So  far  from 
asking  the  reader  blindly  to  follow  me,  I  would  urge  him 
to  accept  no  statement  that  he  himself  can  doubt,  and  to 
adopt  no  conclusion  untested  by  his  own  reason. 

This  I  say,  not  in  unfelt  deprecation  of  myself  nor  in 
idle  compliment  to  the  reader,  but  because  of  the  nature 
and  present  condition  of  political  economy. 

Of  all  the  sciences,  political  economy  is  that  which  to 
civilized  men  of  to-day  is  of  most  practical  importance. 
For  it  is  the  science  which  treats  of  the  nature  of  wealth 
and  the  laws  of  its  production  and  distribution  •  that  is  to 
say,  of  matters  which  absorb  the  larger  part  of  the  thought 
and  effort  of  the  vast  majority  of  us— the  getting  of  a  liv- 
ing. It  includes  in  its  domain  the  greater  part  of  those 
vexed  questions  which  lie  at  the  bottom  of  our  politics  and 
legislation,  of  our  social  and  governmental  theories,  and 
even,  in  larger  measure  than  may  at  first  be  supposed,  of 
our  philosophies  and  religions.  It  is  the  science  to  which 
must  belong  the  solving  of  problems  that  at  the  close  of  a 
century  of  the  greatest  material  and  scientific  development 

xxxi 


xxxii  GENERAL  INTRODUCTION. 

the  world  has  yet  seen,  are  in  all  civilized  countries  clouding 
the  horizon  of  the  future— the  only  science  that  can  enable 
our  civilization  to  escape  already  threatening  catastrophe. 

Yet,  surpassing  in  its  practical  importance  as  political 
economy  is,  he  who  to-day  would  form  clear  and  sure  ideas 
of  what  it  really  teaches  must  form  them  for  himself.  For 
there  is  no  body  of  accepted  truth,  no  consensus  of  recog- 
nized authority,  that  he  may  without  question  accept.  In 
all  other  branches  of  knowledge  properly  called  science  the 
inquirer  may  find  certain  fundamentals  recognized  by  all 
and  disputed  by  none  who  profess  it,  which  he  may  safely 
take  to  embody  the  information  and  experience  of  his  time. 
But,  despite  its  long  cultivation  and  the  multitude  of  its 
professors,  he  cannot  yet  find  this  in  political  economy. 
If  he  accepts  the  teaching  of  one  writer  or  one  school,  it 
will  be  to  find  it  denied  by  other  writers  and  other  schools. 
This  is  not  merely  true  of  the  more  complex  and  delicate 
questions,  but  of  primary  questions.  Even  on  matters 
such  as  in  other  sciences  have  long  since  been  settled,  he 
who  to-day  looks  for  the  guidance  of  general  acceptance 
in  political  economy  will  find  a  chaos  of  discordant  opin- 
ions. So  far  indeed  are  first  principles  from  being  agreed 
on,  that  it  is  still  a  matter  of  hot  dispute  whether  protec- 
tion or  free  trade  is  most  conducive  to  prosperity— a  ques- 
tion that  in  political  economy  ought  to  be  capable  of  as 
certain  an  answer  as  in  hydrodynamics  the  question 
whether  a  ship  ought  to  be  broader  than  she  is  long,  or 
longer  than  she  is  broad. 

This  is  not  for  want  of  what  passes  for  systematic  study. 
Not  only  are  no  subjects  so  widely  and  frequently  discussed 
as  those  that  come  within  the  province  of  political  economy, 
but  every  university  and  college  has  now  its  professor 
of  the  science,  whose  special  business  it  is  to  study  and 
to  teach  it.  But  nowhere  are  inadequacy  and  confusion 
more  apparent  than  in  the  writings  of  these  men ;  nor  is 


GENERAL  INTRODUCTION.  xxxiii 

anything  so  likely  to  give  the  impression  that  there  is  not 
and  cannot  be  a  real  science  of  political  economy. 
I  But  while  this  discordance  shows  that  he  who  would 
really  acquaint  himself  with  political  economy  cannot  rely 
upon  authority,  there  is  in  it  nothing  to  discourage  the 
hope  that  he  who  will  use  his  own  reason  in  the  honest 
search  for  truth  may  attain  firm  and  clear  conclusions. 

For  in  the  supreme  practical  importance  of  political 
economy  we  may  see  the  reason  that  has  kept  and  still 
keeps  it  in  dispute,  and  that  has  prevented  the  growth  of 
any  body  of  accepted  and  assured  opinion. 

Under  existing  conditions  in  the  civilized  world,  the 
great  struggle  among  men  is  for  the  possession  of  wealth. 
"Would  it  not  then  be  irrational  to  expect  that  the  science 
which  treats  of  the  production  and  distribution  of  wealth 
should  be  exempt  from  the  influence  of  that  struggle4- 
Macaulay  has  well  said  that  if  any  large  pecuniary  interest 
were  concerned  in  disputing  the  attraction  of  gravitation, 
that  most  obvious  of  all  facts  would  not  yet  be  accepted. 
What,  then,  can  we  look  for  in  the  teaching  of  a  science 
which  directly  concerns  the  most  powerful  of  "vested 
rights"— which  deals  with  rent  and  wages  and  interest, 
with  taxes  and  tariffs,  with  privileges  and  franchises  and 
subsidies,  with  currencies  and  land-tenures  and  public 
debts,  with  the  ideas  on  which  trade-unions  are  based  and 
the  pleas  by  which  combinations  of  capitalists  are  de- 
fended? Economic  truth,  under  existing  conditions,  has 
not  merely  to  overcome  the  inertia  of  indolence  or  habit ; 
it  is  in  its  very  nature  subject  to  suppressions  and  distor- 
tions from  the  influence  of  the  most  powerful  and  vigilant 
interests.  It  has  not  merely  to  make  its  way  ;  it  must  con- 
stantly stand  on  guard.  It  cannot  safely  be  trusted  to  any 
selected  body  of  men,  for  the  same  reasons  that  the  power 
of  making  laws  and  administering  public  affairs  cannot  be 
so  trusted. 


xxxiv  GENERAL  INTRODUCTION. 

It  is  especially  true  to-day  that  all  large  political  ques- 
tions are  at  bottom  economic  questions.  There  is  thus  in- 
troduced into  the  study  of  political  economy  the  same 
disturbing  element  that  setting  men  by  the  ears  over  the 
study  of  theology  has  written  in  blood  a  long  page  in  the 
world's  history,  and  that  at  one  time,  at  least,  so  affected 
even  the  study  of  astronomy  as  to  prevent  the  authori- 
tative recognition  of  the  earth's  movement  around  the 
sun  long  after  its  demonstration.  The  organization  of 
political  parties,  the  pride  of  place  and  power  that  they 
arouse  and  the  strong  prejudices  they  kindle,  are  always 
inimical  to  the  search  for  truth  and  to  the  acceptance  of 
truth. 

And  while  colleges  and  universities  and  similar  institu- 
tions, though  ostensibly  organized  for  careful  investigation 
and  the  honest  promulgation  of  truth,  are  not  and  cannot 
be  exempt  from  the  influences  that  disturb  the  study  of 
political  economy,  they  are  especially  precluded  under 
present  conditions  from  faithful  and  adequate  treatment 
of  that  science.  For  in  the  present  social  conditions  of 
the  civilized  world  nothing  is  clearer  than  that  there  is 
some  deep  and  wide-spread  wrong  in  the  distribution,  if 
not  in  the  production,  of  wealth.  This  it  is  the  office  of 
political  economy  to  disclose,  and  a  really  faithful  and 
honest  explication  of  the  science  must  disclose  it. 

But  no  matter  what  that  injustice  may  be,  colleges  and 
universities,  as  at  present  constituted,  are  by  the  very  law 
of  their  being  precluded  from  discovering  or  revealing  it. 
For  no  matter  what  be  the  nature  of  this  injustice,  the 
wealthy  class  must,  relatively  at  least,  profit  by  it,  and  this 
is  the  class  whose  views  and  wishes  dominate  in  colleges 
and  universities.  As,  while  slavery  was  yet  strong,  we 
might  have  looked  in  vain  to  the  colleges  and  universities 
and  accredited  organs  of  education  and  opinion  in  our 
Southern  States,  and  indeed  for  that  matter  in  the  North, 


GENERAL  INTRODUCTION.  xxxv 

for  any  admission  of  its  injustice,  so  under  present  condi- 
tions must  we  look  in  vain  to  such  sources  for  any  faithful 
treatment  of  political  economy.  Whoever  accepts  from 
them  a  chair  of  political  economy  must  do  so  under  the 
implied  stipulation  that  he  shall  not  really  find  what  it  is 
his  professional  business  to  look  for.* 

In  these  extraneous  difficulties,  and  not  in  any  difficulty 
inherent  in  political  economy  itself,  lies  the  reason  why, 
to-day,  after  all  the  effort  that  since  Adam  Smith  wrote  has 
been  devoted  to  its  investigation,  or  presumed  investiga- 
tion, he  who  would  really  know  what  it  teaches  can  find 
no  consistent  body  of  undisputed  doctrine  that  he  may 
safely  accept  j  and  can  turn  to  the  colleges  and  universities 
only  with  the  certainty  that,  wherever  else  he  may  find  the 
truth,  he  cannot  find  it  there. 

Yet,  if  political  economy  be  the  one  science  that  cannot 
safely  be  left  to  specialists,  the  one  science  of  which  it  is 
needful  for  all  to  know  something,  it  is  also  the  science 
which  the  ordinary  man  may  most  easily  study.  It  re- 
quires no  tools,  no  apparatus,  no  special  learning.  The 
phenomena  which  it  investigates  need  not  be  sought  for 
in  laboratories  or  libraries  j  they  lie  about  us,  and  are  con- 
stantly thrust  upon  us.  The  principles  on  which  it  builds 
are  truths  of  which  we  all  are  conscious,  and  on  which  in 
every-day  matters  we  constantly  base  our  reasoning  and 
our  actions.  And  its  processes,  which  consist  mainly  in 
analysis,  require  only  care  in  distinguishing  what  is  essen- 
tial from  what  is  merely  accidental. 

In  proposing  to  my  readers  to  go  with  me  in  an  attempt 
to  work  out  the  main  principles  of  political  economy,  I  am 
not  asking  them  to  think  of  matters  they  have  never 
thought  of  before,  but  merely  to  think  of  them  in  a  careful 

*  On  this  subject,  Adam  Smith's  opinion  of  colleges  and  universi- 
ties (Article  II.,  Part  III.,  Chapter  I.,  Book  V.,  "Wealth  of  Nations") 
may  still  be  read  with  much  advantage. 


xxxvi  GENERAL  INTRODUCTION. 

and  systematic  way.  For  we  all  have  some  sort  of  political 
economy.  Men  may  honestly  confess  an  ignorance  of 
astronomy,  of  chemistry,  of  geology,  of  philology,  and 
really  feel  their  ignorance.  But  few  men  honestly  confess 
an  ignorance  of  political  economy.  Though  they  may 
admit  or  even  proclaim  ignorance,  they  do  not  really 
feel  it.  There  are  many  who  say  that  they  know  nothing 
of  political  economy— many  indeed  who  do  not  know  what 
the  term  means.  Yet  these  very  men  hold  at  the  same 
time  and  with  the  utmost  confidence  opinions  upon  matters 
that  belong  to  political  economy,  such  as  the  causes  which 
affect  wages  and  prices  and  profits,  the  effects  of  tariffs, 
the  influence  of  labor-saving  machinery,  the  function  and 
proper  substance  of  money,  the  reason  of  "  hard  times  "  or 
"  good  times,"  and  so  on.  For  men  living  in  society,  which 
is  the  natural  way  for  men  to  live,  must  have  some  sort  of 
politico-economic  theories— good  or  bad,  right  or  wrong. 
The  way  to  make  sure  that  these  theories  are  correct,  or 
if  they  are  not  correct,  to  supplant  them  by  true  theories, 
is  by  such  systematic  and  careful  investigation  as  in  this 
work  I  propose. 

But  to  such  an  investigation  there  is  one  thing  so  neces- 
sary, one  thing  of  such  primary  and  constant  importance, 
that  I  cannot  too  soon  and  too  strongly  urge  it  upon  the 
reader.  It  is,  that  in  attempting  the  study  of  political 
economy  we  should  first  of  all,  and  at  every  step,  make 
sure  of  the  meaning  of  the  words  that  we  use  as  its  terms, 
•  so  that  when  we  use  them  they  shall  always  have  for  us 
the  same  meaning. 

Words  are  the  signs  or  tokens  by  which  in  speech  or 
writing  we  communicate  our  thoughts  to  one  another.  It 
is  only  as  we  attach  a  common  meaning  to  words  that  we 
can  communicate  with  one  another  by  speech.  And  to 
understand  one  another  with  precision,  it  is  necessary  that 


GENERAL  INTRODUCTION.  xxxvii 

each  attach  precisely  the  same  meaning  to  the  same  word. 
Thus,  two  men  may  look  on  the  ocean  from  the  same  place, 
and  one  honestly  insist  that  there  are  three  ships  in  sight, 
while  the  other  as  honestly  insists  that  there  are  only  two, 
if  the  one  uses  the  word  ship  in  its  general  meaning  of 
navigable  vessel,  and  the  other  uses  it  in  its  technical 
meaning  of  a  vessel  carrying  three  square-rigged  masts. 
Such  use  of  words  in  somewhat  different  senses  is  pecu- 
liarly dangerous  in  philosophic  discussion. 

But  words  are  more  than  the  means  by  which  we  com- 
municate our  thoughts.  They  are  also  signs  or  tokens  in 
which  we  ourselves  think— the  labels  of  the  thought- 
drawers  or  pigeonholes  in  which  we  stow  away  the  various 
ideas  that  we  often  mentally  deal  with  by  label.  Thus,  we 
cannot  think  with  precision  unless  in  our  own  minds 
we  use  words  with  precision.  Failure  to  do  this  is  a 
great  cause  of  the  generation  and  persistence  of  economic 
fallacies. 

In  all  studies  it  is  important  that  we  should  attach  defi- 
nite meanings  to  the  terms  we  use.  But  this  is  especially 
important  in  political  economy.  For  in  other  studies  most 
of  the  words  used  as  terms  are  peculiar  to  that  study.  The 
terms  used  in  chemistry,  for  instance,  are  used  only  in 
chemistry.  This  makes  the  study  of  chemistry  harder  in 
beginning,  for  the  student  has  to  familiarize  himself  with 
new  words.  But  it  avoids  subsequent  difficulties,  for  these 
words  being  used  only  in  chemistry,  their  meaning  is  not 
likely  to  be  warped  by  other  use  from  the  one  definite 
sense  they  properly  bear  in  chemistry. 

Now  the  terms  used  in  political  economy  are  not  words 
reserved  to  it.  They  are  words  in  every-day  use,  which 
the  necessities  of  daily  life  constantly  require  us  to  give  to, 
and  accept  for,  a  different  than  the  economic  meaning. 
In  studying  political  economy,  in  thinking  out  any  of  its 


xxxviii  GENERAL  INTRODUCTION. 

problems,  it  is  absolutely  necessary  to  give  to  such  terms 
as  wealth,  value,  capital,  land,  labor,  rent,  interest,  wages, 
money,  and  so  on,  a  precise  meaning;  and  to  use  them 
only  in  this— a  meaning  which  always  differs,  and  in  some 
cases  differs  widely,  from  the  common  meaning.  But  not 
only  have  we  all  been  accustomed  in  the  first  place  to  use 
these  words  in  their  common  meanings  j  but  even  after  we 
have  given  them  as  politico-economic  terms  a  definite 
meaning,  we  must,  in  ordinary  talk  and  reading  continue 
to  use  and  accept  them  in  their  ordinary  sense. 

Hence  arises  in  political  economy  a  liability  to  confusion 
in  thought  from  lack  of  definiteness  in  the  use  of  terms. 
The  careless  as  to  terms  cannot  take  a  step  without  falling 
into  this  confusion,  and  even  the  usually  careful  are  liable 
to  fall  into  confusion  if  at  any  moment  they  relax  their 
vigilance.  The  most  eminent  writers  on  political  economy 
have  given  examples  of  this,  confusing  themselves  as  well 
as  their  readers  by  the  vague  use  of  a  term.  To  guard 
against  this  danger  it  is  necessary  to  be  careful  in  begin- 
ning, and  continuously  to  be  careful.  I  shall  therefore  in 
this  work  try  to  define  each  term  as  it  arises,  and  there- 
after, when  using  it  as  an  economic  term,  try  to  use  it  in 
that  precise  sense,  and  in  no  other. 

To  define  a  word  is  to  mark  off  what  it  includes  from 
what  it  does  not  include— to  make  it  in  our  minds,  as  it 
were,  clear  and  sharp  on  its  edges— so  that  it  will  always 
stand  for  the  same  thing  or  things,  not  at  one  time  mean 
more  and  at  another  time  less. 

Thus,  beginning  at  the  beginnings,  let  us  consider  the 
nature  and  scope  of  political  economy,  that  we  may  see  its 
origin  and  meaning,  what  it  includes  and  what  it  does  not 
include.  If  in  this  I  ask  the  reader  to  go  with  me  deeper 
than  writers  on  political  economy  usually  do,  let  him  not 
think  me  wandering  from  the  subject.  He  who  would 
build  a  towering  structure  of  brick  and  stone,  that  in  stress 


GENERAL  INTRODUCTION.  xxxix 

and  strain  will  stand  firm  and  plumb,  digs  for  its  founda- 
tion to  solid  rock. 

Should  we  grudge  such  pains  in  laying  the  foundations 
of  a  great  science,  on  which  in  its  superstructure  so  much 
must  rest  ? 

In  nothing  more  than  in  philosophy  is  it  wise  that  we 
should  be  "  like  a  man  which  built  an  house,  and  digged 
deep,  and  laid  the  foundation  on  a  rock." 


Though  but  an  atom  midst  immensity, 

Still  I  am  something,  fashioned  by  Thy  hand ! 

I  hold  a  middle  rank  'twixt  heaven  and  earth- 
On  the  last  verge  of  mortal  being  stand 

Close  to  the  realms  where  angels  have  their  birth, 
Just  on  the  boundaries  of  the  spirit-land ! 

The  chain  of  being  is  complete  in  me — 
In  me  is  matter's  last  gradation  lost, 

And  the  next  step  is  spirit— Deity ! 
I  can  command  the  lightning,  and  am  dust ! 

—Bowring's  translation  of  Derzhavin. 


CONTENTS  OF  BOOK  I. 


THE  MEANING   OF  POLITICAL  ECONOMY. 


PAGE 

INTRODUCTION  TO  BOOK  1 7 

CHAPTER  I. 
THE  THREE  FACTORS  OP  THE  WORLD. 

SHOWING   THE  CONSTITUENTS   OP  ALL  WE   PERCEIVE. 

Meaning  of  factor ;  and  of  philosophy ;  and  of  the  world — What 
we  call  spirit — What  we  call  matter — What  we  call  energy — 
Though  these  three  may  be  at  bottom  one,  we  must  separate 
them  in  thought — Priority  of  spirit 9 

CHAPTER  II. 
MAN,  HIS  PLACE  AND  POWERS. 

SHOWING  OUR  RELATIONS  TO  THE  GLOBE,  AND  THE  QUALITIES 
THAT  ENABLE  US  TO  EXTEND  OUR  KNOWLEDGE  OF  IT  AND  OUR 
POWERS  ON  IT. 

Man's  earliest  knowledge  of  his  habitat — How  that  knowledge 
grows,  and  what  civilized  men  now  know  of  it — The  essential 
distinction  between  man  and  other  animals — In  this  lies  his 
power  of  producing  and  improving 11 

CHAPTER  III. 
HOW  MAN'S  POWERS  ARE.  EXTENDED. 

SHOWING  THAT  THEIR  USE   OF  REASON  WELDS  MEN  INTO 
THE   SOCIAL   ORGANISM  OR  ECONOMIC  BODY. 

Extensions  of  man's  powers  in  civilization — Due  not  to  improve- 
ment in  the  individual  but  in  the  society — Hobbes's  "Levia- 
than " — The  Greater  Leviathan — This  capacity  for  good  also 

capacity  for  evil 19 

3 


4  CONTENTS  OF  BOOK  L 

CHAPTER  IV. 
CIVILIZATION— WHAT  IT  MEANS. 

PAGE 

SHOWING  THAT  CIVILIZATION   CONSISTS  IN  THE  WELDING  OP 
MEN  INTO   THE   SOCIAL  ORGANISM  OR  ECONOMIC  BODY. 

Vagueness  as  to  what  civilization  is — Guizot  quoted — Deriva- 
tion and  original  meaning — Civilization  and  the  State — Why 
a  word  referring  to  the  precedent  and  greater  has  been  taken 
from  one  referring  to  the  subsequent  and  lesser  .  .  .24 

CHAPTER  V. 
THE  ORIGIN   AND  GENESIS  OF  CIVILIZATION. 

SHOWING  THE   NATURE  OP  REASON  ;  AND  HOW  IT  IMPELS  TO 
EXCHANGE,  BY  WHICH   CIVILIZATION  DEVELOPS. 

Reason  the  power  of  tracing  causal  relations— Analysis  and  syn- 
thesis— Likeness  and  unlikeness  between  man  and  other  ani- 
mals— Powers  that  the  apprehension  of  causal  relations  gives — 
Moral  connotations  of  civilization — But  begins  with  and  in- 
creases through  exchange — Civilization  relative,  and  exists  in 
the  spiritual 29 

CHAPTER  VI. 
OF  KNOWLEDGE  AND  THE  GROWTH  OF  KNOWLEDGE. 

SHOWING  THAT   THE   GROWTH   OP  KNOWLEDGE  IS  BY   COOPER- 
ATION, AND  THAT  IT  INHERES  IN  THE  SOCIETY. 

Civilization  implies  greater  knowledge — This  gain  comes  from 
cooperation — The  incommunicable  knowing  called  skill — The 
communicable  knowing  usually  called  knowledge — The  rela- 
tion of  systematized  knowledge  to  the  means  of  storing  know- 
ledge, to  skill  and  to  the  economic  body — Illustration  from  as- 
tronomy   39 

CHAPTER  VII. 
OF  SEQUENCE,  CONSEQUENCE  AND  LAWS  OF  NATURE. 

SHOWING  THE  PROPER  MEANING  OF  SEQUENCE  AND   OF  CON- 
SEQUENCE, AND   WHY  WE   SPEAK  OF  LAWS  OF  NATURE. 

Coexistence  and  succession — Sequence  and  consequence — Causes 
in  series ;  names  for  them — Our  direct  knowledge  is  of  spirit 
— Simplest  perception  of  causal  relation — Extensions  of  this — 
The  causal  search  unsatisfied  till  it  reaches  spirit — And  finds 
or  assumes  intent — Early  evidences  of  this — Why  we  must 
assume  a  superior  spirit — Evidences  of  intent — The  word 
nature  and  its  implication  of  will  or  spirit — The  word  law — 
The  term  "law  of  nature" 44 


CONTENTS  OF  BOOK  I. 


CHAPTER  VIII. 
OF  THE  KNOWLEDGE  PROPERLY  CALLED  SCIENCE. 

PAGE 

SHOWING  THAT  SCIENCE  DEALS  ONLY  WITH  LAWS  OP  NATURE, 
AND  THAT  IN  THE  CURRENT  POLITICAL  ECONOMY  THIS  HAS 
BEEN  FORGOTTEN. 

Proper  meaning  of  science — It  investigates  laws  of  nature,  not 
laws  of  man — Distinction  between  the  two — Their  confusion 
in  the  current  political  economy — Mason  and  Lalor's  "  Primer 
of  Political  Economy  n  quoted — Absurdity  of  this  confusion — 
Turgot  on  the  cause  of  such  confusions  .  .  .  .  .58 

CHAPTER  IX. 
THE  ECONOMY  CALLED  POLITICAL  ECONOMY. 

SHOWING  THE  MEANING,  UNITS  AND   SCOPE  OF  POLITICAL 
ECONOMY. 

The  word  economy — The  word  political — Origin  of  the  term 
"political  economy"  and  its  confusions — It  is  not  concerned 
with  the  body  politic,  but  with  the  body  economic — Its  units, 
and  the  system  or  arrangement  of  which  it  treats — Its  scope  .  65 

CHAPTER  X. 
THE  ELEMENTS  OF  POLITICAL  ECONOMY. 

SHOWING  HOW  POLITICAL  ECONOMY  SHOULD   PROCEED  AND 
WHAT  RELATIONS  IT   SEEKS  TO  DISCOVER. 

How  to  understand  a  complex  system — It  is  the  purpose  of  such 
a  system  that  political  economy  seeks  to  discover — These 
laws,  natural  laws  of  human  nature — The  two  elements  rec- 
ognized by  political  economy— These  distinguished  only  by 
reason — Human  will  affects  the  material  world  only  through 
laws  of  nature — It  is  the  active  factor  in  all  with  which  polit- 
ical economy  deals 74 

CHAPTER  XI. 
OF  DESIRES  AND  SATISFACTIONS. 

SHOWING  THE  WIDTH  AND  IMPORTANCE  OF  THE  FIELD  OF 
POLITICAL  ECONOMY. 

Action  springs  from  desire  and  seeks  satisfaction — Order  of  de- 
sires— Wants  or  needs — Subjective  and  objective  desires — 
Material  and  immaterial  desires — The  hierarchy  of  life  and 
of  desires  .  .  .  .81 


6  CONTENTS  OF  BOOK  I. 

CHAPTER  XII. 
THE  FUNDAMENTAL  LAW  OF  POLITICAL  ECONOMY. 

PAGE 

SHOWING  THAT  THE  LAW  FROM  WHICH  POLITICAL  ECONOMY  PRO- 
CEEDS IS  THAT  MEN  SEEK  TO  SATISFY  THEIR  DESIRES  WITH 
THE  LEAST  EXERTION. 

Exertion  followed  by  weariness — The  fact  that  men  seek  to  sat- 
isfy their  desires  with  the  least  exertion — Meaning  and  ana- 
logue— Exemplified  in  trivial  things — Is  a  law  of  nature  and 
the  fundamental  law  of  political  economy — Substitution  of 
selfishness  for  this  principle — Buckle  quoted— Political  econ- 
omy requires  no  such  assumption — The  necessity  of  labor  not 
a  curse 86 

CHAPTER  XIH. 
METHODS  OF  POLITICAL  ECONOMY. 

SHOWING  THE  NATURE  OF  THE  METHODS  OF  INVESTIGATION 
THAT  MAY  BE  USED  IN  POLITICAL  ECONOMY. 

Deductive  and  inductive  schools — "New  American  Cyclopedia" 
quoted — Triumph  of  the  inductionists — The  method  of  in- 
duction and  the  method  of  deduction — Method  of  hypothesis. 
Bacon's  relation  to  induction — Real  error  of  the  deduction- 
ists  and  the  mistake  of  the  inductionists— Lalor's  Cyclopedia 
quoted — Result  of  the  triumph  of  the  inductionists — A  true 
science  of  political  economy  must  follow  the  deductive  method 
— Da  vis's  ''Elements  of  Inductive  Logic"  quoted — Double  as- 
surance of  the  real  postulate  of  political  economy — Method  of 
mental  or  imaginative  experiment 92 

CHAPTER  XIV. 
POLITICAL  ECONOMY  AS  SCIENCE  AND  AS  ART. 

SHOWING  THAT  POLITICAL  ECONOMY  IS  PROPERLY  A  SCIENCE, 
AND  THE  MEANING  IT  SHOULD  HAVE  IF  SPOKEN  OF  AS  ART. 

Science  and  art — There  must  be  a  science  of  political  economy, 
but  no  proper  art — What  must  be  the  aim  of  an  art  of  politi- 
cal economy — White  art  and  black  art — Course  of  further 
investigation 101 


INTRODUCTION  TO  BOOK  I. 

THE  earliest,  and  as  I  think  sufficient,  definition  of 
Political  Economy,  is,  the  science  that  treats  of  the 
nature  of  wealth,  and  of  the  laws  of  its  production  and 
distribution.  But  as  this  definition  seems  never  to  have 
been  fully  understood  and  adhered  to  by  the  accepted 
teachers  of  political  economy,  and  has  during  late  years 
been  abandoned  by  those  who  occupy  the  position  of  of- 
ficial teachers  in  all  our  leading  colleges  and  universities, 
let  us,  beginning  at  the  beginnings,  endeavor  to  see  for 
ourselves  just  what  political  economy  is. 


CHAPTER  I. 
<      THE  THREE  FACTORS  OF  THE  WORLD. 

SHOWING  THE  CONSTITUENTS  OF  ALL  WE  PERCEIVE. 

Meaning  of  factor ;  and  of  philosophy ;  and  of  the  world— What  we 
call  spirit— What  we  call  matter— What  we  call  energy— Though 
these  three  may  be  at  bottom  one,  we  must  separate  them  in 
thought — Priority  of  spirit. 

THE  word  factor,  in  commercial  use,  means  one  who 
acts  as  agent  for  another.  In  mathematical  use,  it 
means  one  of  the  quantities  which  multiplied  together  form 
a  product.  Hence  in  philosophy,  which  may  be  denned  as 
the  search  for  the  nature  and  relations  of  things,  the  word 
factor  affords  a  fit  term  for  the  elements  which  bring 
about  a  result,  or  the  categories  into  which  analysis  enables 
us  to  classify  these  elements. 

In  the  world— I  use  the  term  in  its  philosophic  sense  of 
the  aggregate  or  system  of  things  of  which  we  are  cog- 
nizant and  of  which  we  ourselves  are  part— we  are  enabled 
by  analysis  to  distinguish  three  elements  or  factors  : 

1.  That  which  feels,  perceives,  thinks,  wills  j  which  to 
distinguish,  we  call  mind  or  soul  or  spirit. 

2.  That  which  has  a  mass  or  weight,  and  extension  or 
form ;  which  to  distinguish,  we  call  matter. 

3.  That  which  acting  on  matter  produces  movement; 
which  to  distinguish,  we  call  motion  or  force  or  energy. 


10  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

We  cannot,  in  truth,  directly  recognize  energy  apart 
from  matterj  nor  matter  without  some  manifestation  of 
energy ;  nor  mind  or  spirit  uncon joined  with  matter  and 
motion.  For  though  our  own  consciousness  may  testify 
to  our  own  essentially  spiritual  nature,  or  even  at  times  to 
what  we  take  to  be  direct  evidence  of  pure  spiritual  exis- 
tence, yet  consciousness  itself  begins  with  us  only  after 
bodily  life  has  already  begun,  and  memory  by  which  alone 
we  can  recall  past  consciousness  is  later  still  in  appearing. 
It  may  be  that  what  we  call  matter  is  but  a  form  of  energy  j 
and  it  may  perhaps  be  that  what  we  call  energy  is  but  a 
manifestation  of  what  we  call  mind  or  soul  or  spirit  j  and 
some  have  even  held  that  from  matter  and  its  inherent 
powers  all  else  originates.  Yet  though  they  may  not  be 
in  fact  separable  by  us,  and  though  it  may  be  that  at 
bottom  they  are  one,  we  are  compelled  in  thought  to  dis- 
tinguish these  three  as  independent,  separable  elements, 
which  in  their  actions  and  reactions  make  up  the  world  as 
it  is  presented  to  our  perception. 

Of  these  from  our  standpoint,  that  which  feels,  perceives, 
thinks,  wills,  comes  first  in  order  of  priority,  for  it  is  this 
which  is  first  in  our  own  consciousness,  and  it  is  only 
through  this  that  we  have  consciousness  of  any  other  exis- 
tence. In  this,  as  our  own  consciousness  testifies,  is  the 
initiative  of  all  our  own  motions  and  movements,  so  far  as 
consciousness  and  memory  shed  light ;  and  in  all  cases  in 
which  we  can  trace  the  genesis  of  anything  to  its  begin- 
ning we  find  that  beginning  in  thought  and  will.  So  clear, 
so  indisputable  is  the  priority  of  this  spiritual  element  that 
wherever  and  whenever  men  have  sought  to  account  for 
the  origin  of  the  world  they  have  always  been  driven  to 
assume  a  great  spirit  or  God.  For  though  there  be  athe- 
istic theories,  they  always  avoid  the  question  of  origin, 
and  assume  the  world  always  to  have  been. 


CHAPTER  II. 
MAN,  HIS  PLACE  AND  POWERS. 

SHOWING  OUR  RELATIONS  TO  THE  GLOBE,  AND  THE  QUALI- 
TIES THAT  ENABLE  US  TO  EXTEND  OUR  KNOWLEDGE  OF  IT 
AND  OUR  POWERS  ON  IT. 

Man's  earliest  knowledge  of  his  habitat — How  that  knowledge  grows, 
and  what  civilized  men  now  know  of  it— The  essential  distinc- 
tion between  man  and  other  animals— In  this  lies  his  power  of 
producing  and  improving. 

WE  awake  to  consciousness  to  find  ourselves,  clothed  in 
flesh,  and  in  company  with  other  like  beings,  resting 
on  what  seems  to  us  a  plane  surface.  Above  us,  when  the 
clouds  do  not  conceal  them,  the  sun  shines  by  day  and  the 
moon  and  stars  by  night.  Of  what  this  place  is,  and  of 
our  relations  to  it,  the  first  men  probably  knew  little  more 
than  is  presented  to  us  in  direct  consciousness,  little  more 
in  fact  than  the  animals  know  j  and,  individually,  we  our- 
selves could  know  little  more.  But  the  observations  and 
reflections  of  many  succeeding  men,  garnered  and  system- 
atized, enable  us  of  the  modern  civilization  to  know,  and 
with  the  eyes  of  the  mind  almost  to  see,  things  to  which  the 
senses  untaught  by  reason  are  blind. 

By  the  light  of  this  gathered  knowledge  we  behold  our- 
selves, the  constantly  changing  tenants  of  the  exterior  of 
a  revolving  sphere,  circling  around  a  larger  and  luminous 
sphere,  the  sun,  and  beset  on  all  sides  by  depths  of  space, 
to  which  we  can  neither  find  nor  conceive  of  limits. 

11 


12  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

Through  this  immeasurable  space  revolve  myriads  of  lu- 
minous bodies  of  the  nature  of  our  sun,  surrounded,  it  is 
confidently  inferred  from  the  fact  that  we  know  it  to  be 
the  case  with  our  sun,  by  lesser,  non-luminous  bodies  that 
have  in  them  their  centers  of  revolution. 

Our  sun,  but  one,  and  far  from  one  of  the  largest,  of 
countless  similar  orbs,  is  the  center  of  light  and  heat  and 
revolution  to  eight  principal  satellites  (having  in  their 
turn  satellites  of  their  own),  as  well  as  to  an  indefinite 
number  of  more  minute  bodies  known  to  us  as  asteroids 
and  of  more  erratic  bodies  called  comets.  Of  the  princi- 
pal satellites  of  the  sun,  the  third  in  point  of  distance  from 
it,  and  the  fourth  in  point  of  size,  is  our  earth.  It  is  in 
constant  movement  around  the  sun,  and  in  constant  revo- 
lution on  its  own  axis,  while  its  satellite,  the  moon,  also 
revolving  on  its  own  axis,  is  in  constant  movement  around 
it.  The  sun  itself,  revolving  too  on  its  own  axis,  is,  with 
all  its  attendant  bodies,  in  constant  movement  around 
some,  probably  moving,  point  in  the  universe  which 
astronomers  have  not  yet  been  able  to  determine. 

Thus  we  find  ourselves,  on  the  surface  of  a  globe  seem- 
ingly fixed,  but  really  in  constant  motion  of  so  many  dif- 
ferent kinds  that  it  would  be  impossible  with  our  present 
knowledge  to  make  a  diagram  indicating  its  real  movement 
through  space  at  any  point— a  globe  large  to  us,  yet  only 
as  a  grain  of  sand  on  the  sea-shore  compared  with  the 
bodies  and  spaces  of  the  universe  of  which  it  is  a  part. 
We  find  ourselves  on  the  surface  of  this  ceaselessly  mov- 
ing globe,  as  passengers,  brought  there  in  utter  insensibil- 
ity, they  know  not  how  or  whence,  might  find  themselves 
on  the  deck  of  a  ship,  moving  they  know  not  where ,  and 
who  see  in  the  distance  similar  ships,  whether  tenanted  or 
how  tenanted  they  can  only  infer  and  guess.  The  im- 
measurably great  lies  beyond  us,  and  about  and  beneath 


Chap.  II.         MAN,  HIS  PLACE  AND  POWERS.  13 

us  the  immeasurably  small.  The  microscope  reveals  in- 
finitudes no  less  startling  to  our  minds  than  does  the  tele- 
scope. 

Here  we  are,  depth  upon  depth  about  us,  confined  to  the 
bottom  of  that  sea  of  air  which  envelops  the  surface  of  this 
moving  globe.  In  it  we  live  and  breathe  and  are  con- 
stantly immersed.  Were  our  lungs  to  cease  taking  in  and 
pumping  out  this  air,  or  our  bodies  relieved  of  its  pressure, 
we  should  die. 

Small  as  our  globe  seems  in  the  light  of  astronomy,  it 
is  not  really  of  the  whole  globe  that  we  are  tenants,  but 
only  of  a  part  of  its  surface.  Above  this  mean  surface, 
men  have  found  it  possible  only  with  the  utmost  effort  and 
fortitude  to  ascend  something  less  than  seven  miles  j  below 
it  our  deepest  mining  shafts  do  not  pierce  a  mile.  Thus 
the  extreme  limits  in  depth  and  height  to  which  man  may 
occasionally  adventure,  though  not  permanently  live,  are 
hardly  eight  miles.  In  round  numbers  the  globe  is  8000 
miles  in  diameter.  Thus  the  skin  of  the  thinnest-skinned 
apple  gives  no  idea  of  the  relative  thinness  of  the  zone  of 
perpendicular  distance  to  which  man  is  confined.  And 
three  fourths  of  the  surface  of  the  globe  at  its  junction 
with  the  air  is  covered  by  water,  on  which,  though  man 
may  pass,  he  cannot  dwell;  while  considerable  parts  of 
what  remain  are  made  inaccessible  by  ice.  Like  a  bridge 
of  hair  is  the  line  of  temperature  that  we  must  keep.  In- 
vestigators tell  us  of  the  existence  of  temperatures  thou- 
sands of  degrees  above  zero  and  thousands  of  degrees  below 
zero.  But  man's  body  must  maintain  the  constant  level 
of  a  fraction  over  98  degrees  above  zero.  A  rise  or  fall 
of  seven  degrees  either  way  from  this  level  and  he  dies. 
With  the  permanent  rise  or  fall  of  a  few  more  degrees  in 
the  mean  temperature  of  the  surface  of  the  globe  it  would 
become  uninhabitable  by  us. 


14  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

And  while  all  about  us,  even  what  seems  firmest,  is  in 
constant  change  and  motion,  so  is  it  with  ourselves.  These 
bodies  of  ours  are  in  reality  like  the  flame  of  a  gas-burner, 
which  has  continuous  and  denned  form,  but  only  as  the 
manifestation  of  changes  in  a  stream  of  succeeding  parti- 
cles, and  which  disappears  the  moment  that  stream  is  cut 
off.  What  there  is  real  and  distinctive  in  us  is  that  to 
which  we  may  give  a  name  but  cannot  explain  nor  easily 
define— that  which  gives  to  changing  matter  and  passing 
motion  the  phase  and  form  of  man.  But  our  bodies  and 
our  physical  powers  themselves,  like  the  form  and  power 
of  the  gas-flame,  are  only  passing  manifestations  of  that 
indestructible  matter  and  eternally  pulsing  energy  of  which 
the  universe  so  far  as  it  is  tangible  to  us  is  made  up.  Stop 
the  air  that  every  instant  is  drawn  through  our  lungs  and 
we  cease  to  live.  Stop  the  food  and  drink  that  serve  to 
us  the  same  purpose  as  coal  and  water  to  the  steam-engine, 
and,  as  certainty,  if  more  slowly,  the  same  result  follows. 

In  all  this,  man  resembles  the  other  animals  that  with 
him  tenant  the  superficies  of  the  same  earth.  Physically 
he  is  merely  such  an  animal,  in  form  and  structure  and 
primary  needs  closely  allied  to  the  mammalia,  with  whose 
species  he  is  zoologically  classified.  Were  man  only  an 
animal  he  would  be  but  an  inferior  animal.  Nature  has 
not  given  him  the  powers  and  weapons  which  enable  other 
animals  readily  to  secure  their  food.  Nor  yet  has  she 
given  him  the  covering  which  protects  them.  Had  he  like 
them  no  power  of  providing  himself  with  artificial  clothing, 
man  could  not  exist  in  many  of  the  regions  he  now  in- 
habits. He  could  live  only  in  the  most  genial  and  equable 
parts  of  the  globe. 

But  man  is  more  than  an  animal.  Though  in  physical 
equipment  he  may  in  nothing  surpass,  and  in  some  things 
fall  below  other  animals,  in  mental  equipment  he  is  so 
vastly  superior  as  to  take  him  out  of  their  class,  and  to 


Chap.  II.         MAN,  HIS  PLACE  AND  POWERS.  15 

make  him  the  lord  and  master  of  them  all— to  make  him 
veritably,  of  all  that  we  may  see,  "  the  roof  and  crown  of 
things."  And  what  more  clearly  perhaps  than  all  else  in- 
dicates the  deep  gulf  which  separates  him  from  all  other 
animals  is  that  he  alone  of  all  animals  is  the  producer,  or 
bringer  forth,  and  in  that  sense  a  maker.  In  this  is  a 
difference  which  renders  the  distinction  between  the  high- 
est animal  and  the  lowest  man  one  not  of  degree  but  of 
kind,  and  which,  linked  with  the  animals  though  he  be, 
justifies  the  declaration  of  the  Hebrew  Scripture,  that  man 
is  created  in  the  likeness  of  the  All-Maker. 

Consider  this  distinction :  We  know  of  no  race  of  men 
so  low  that  they  do  not  raise  fruits  or  vegetables,  or 
domesticate  and  breed  animals;  that  do  not  cook  food; 
that  do  not  fashion  weapons ;  that  do  not  construct  habita- 
tions ;  that  do  not  make  for  themselves  garments ;  that  do 
not  adorn  themselves  or  their  belongings  with  ornamenta- 
tion; that  do  not  show  at  least  the  rude  beginnings  of 
drawing  and  painting  and  sculpture  and  music.  In  all  the 
tribes  of  animated  nature  below  man  there  is  not  the 
slightest  indication  of  the  power  thus  shown.  No  animal 
save  man  ever  kindled  a  fire  or  cooked  a  meal,  or  made  a 
tool  or  fashioned  a  weapon. 

It  is  true  that  the  squirrel  hides  nuts ;  that  birds  build 
nests ;  that  the  beaver  dams  streams ;  that  bees  construct 
combs,  in  which  they  store  the  honey  they  extract  from 
flowers ;  that  spiders  weave  webs ;  that  one  species  of  ants 
are  said  to  milk  insects  of  another  kind.  All  this  is  true, 
just  as  it  is  also  true  that  there  are  birds  whose  melody 
far  surpasses  the  best  music  of  the  savage,  and  that  on 
tribes  below  man  nature  lavishes  an  adornment  of  attire 
that  in  taste  as  well  as  brilliancy  surpasses  the  meretricious 
adornments  of  primitive  man. 

But  in  all  this  there  is  nothing  akin  to  the  faculties 
which  in  these  things  man  displays.  What  man  does,  he 


16  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

does  by  taking  thought,  by  consciously  adjusting  means 
to  ends.  He  does  it  by  adapting  and  contriving  and  ex- 
perimenting and  copying ;  by  effort  after  effort  and  trial 
after  trial.  What  he  does,  and  his  ways  of  doing  it,  vary 
with  the  individual,  with  social  development,  with  time  and 
place  and  surroundings,  and  with  what  he  sees  others  do. 

But  the  squirrel  hides  its  nuts;  the  birds  after  their 
orders  build  their  nests,  and  in  due  time  force  their  young 
to  fly  ;  the  beaver  constructs  its  dam ;  the  bees  store  their 
honey;  the  spiders  weave,  and  the  ants  do  the  work  of 
their  societies,  without  taking  thought,  without  toilsomely 
scheming  for  the  adapting  of  means  to  ends,  without 
experimenting  or  copying  or  improving.  What  they  do  of 
such  things,  they  do  not  as  originators  who  have  discovered 
how  to  do  it ;  nor  yet  as  learners  or  imitators  or  copyists. 
They  do  it,  first  as  well  as  last,  unfalteringly  and  unalter- 
irigly,  forgetting  nothing  and  improving  in  nothing.  They 
do  it,  not  by  reason  but  by  instinct  ;  by  an  impulse  inhering 
in  their  nature  which  prompts  them  without  perplexity  or 
trial  on  their  part  to  go  so  far,  but  gives  them  no  power 
to  go  farther.  They  do  it  as  the  bird  sings  or  the  dog 
barks,  as  the  hen  sits  on  her  eggs  or  the  chick  picks  its 
way  from  the  shell  to  scratch  the  ground. 

Nature  provides  for  all  living  things  beneath  man  by 
implanting  in  them  blind,  strong  impulses  which  at  proper 
times  and  seasons  prompt  them  to  do  what  it  is  necessary 
they  should  do.  But  to  man  she  grants  only  such  impel- 
lings  of  instinct  as  that  which  prompts  the  mother  to  press 
the  new-born  babe  to  her  breast  and  the  babe  to  suckle. 
With  exceptions  such  as  these,  she  withdraws  from  man 
her  guiding  power  and  leaves  him  to  himself.  For  in  him 
a  higher  power  has  arisen  and  looks  out  on  the  world— a 
power  that  separates  him  from  the  brute  as  clearly  and  as 
widely  as  the  brute  is  separated  from  the  clod  ;  a  power 
that  has  in  it  the  potency  of  producing,  of  making,  of 


Chap.  II.         MAN,  HIS  PLACE  AND  POWERS.  17 

causing  things  to  be  j  a  power  that  seeks  to  look  back  into 
a  past  ere  the  globe  was,  and  to  peer  into  a  future  when 
it  will  cease  to  exist  j  a  power  that  looks  on  Nature's  show 
with  curiosity  like  that  with  which  an  apprentice  might 
scan  a  master's  work,  and  will  ask  why  tides  run  and 
winds  blow,  and  how  suns  and  stars  have  been  put  to- 
gether ;  a  power  that  in  its  beginnings  lacks  the  certainty 
and  promptness  of  instinct,  but  which,  though  infinitely 
lower  in  degree,  must  yet  in  some  sort  be  akin  to  that  from 
which  all  things  proceed. 

As  this  power,  which  we  call  reason,  rises  in  man,  na- 
ture withdraws  the  light  of  instinct  and  leaves  him  to  his 
own  devices— to  rise  or  fall,  to  soar  above  the  brute  or  to 
sink  lower.  For  as  the  Hebrew  Scriptures  have  phrased 
it,  his  eyes  are  opened  and  before  him  are  good  and  evil. 
The  ability  to  fall,  no  less  than  the  ability  to  rise— the  very 
failures  and  mistakes  and  perversities  of  man— show  his 
place  and  powers.  There  is  among  the  brutes  no  drunk- 
enness, no  unnatural  vice,  no  waste  of  effort  in  accom- 
plishing injurious  results,  no  wanton  slaughter  of  their 
own  kind,  no  want  amid  plenty.  We  may  conceive  of 
beings  in  the  form  of  man,  who,  like  these  animals,  should 
be  ruled  by  such  clear  and  strong  instincts  that  among 
them  also  there  would  be  no  liability  to  such  perversions. 
Yet  such  beings  would  not  be  men.  They  would  lack  the 
essential  character  and  highest  powers  of  man.  Fitted 
perfectly  to  their  environment  they  might  be  happy  in  a 
way.  But  it  would  be  as  the  full-fed  hog  is  happy.  The 
pleasure  of  making,  the  joy  of  overcoming,  the  glory  of 
rising,  how  could  they  exist  for  such  beings  ?  That  man 
is  not  fitted  for  his  environment  shows  his  higher  quality. 
In  him  is  that  which  aspires— and  still  aspires. 

Endowed  with  reason,  and  deprived,  or  all  but  deprived, 
of  instinct,  man  differs  from  other  animals  in  being  the 
producer.  Like  them,  for  instance,  he  requires  food.  But 


18  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

while  the  animals  get  their  food  by  taking  what  they  find, 
and  are  thus  limited  by  what  they  find  already  in  exis- 
tence, man  has  the  power  of  getting  his  food  by  bringing 
it  into  existence.  He  is  thus  enabled  to  obtain  food  in 
greater  variety  and  in  larger  quantity.  The  amount  of 
grass  limits  the  number  of  wild  cattle,  the  amount  of  their 
prey  limits  the  number  of  the  carnivora  j  but  man  causes 
grasses  and  grains  and  fruits  to  grow  where  they  did  not 
grow  before ;  he  breeds  animals  on  which  he  feeds.  And 
so  it  is  with  the  fulfilment  of  all  his  wants  j  the  satisfaction 
of  all  his  desires.  By  the  use  of  his  animal  powers,  man 
can  cover  perhaps  as  much  ground  in  a  day  as  can  a  horse 
or  a  dog;  he  can  cross  perhaps  about  as  wide  a  stream. 
But  by  virtue  of  the  power  that  makes  him  the  producer 
he  is  already  spanning  continents  and  oceans  with  a  speed, 
a  certainty  and  an  ease  that  not  even  the  birds  of  most 
powerful  wing  and  swiftest  flight  can  rival. 


CHAPTER  III. 
HOW  MAN'S  POWERS  ARE  EXTENDED. 

SHOWING  THAT  THEIR  USE  OF  REASON  WELDS  MEN  INTO 
THE  SOCIAL  ORGANISM  OR  ECONOMIC  BODY. 

Extensions  of  man's  powers  in  civilization— Due  not  to  improve- 
ment in  the  individual  but  in  the  society — Hobbes's  "Leviathan" 
—The  Greater  Leviathan— This  capacity  for  good  also  capacity 
for  evil. 

MAN,  as  we  have  any  knowledge  of  him,  either  in  the 
present  or  in  the  past,  is  always  man ;  differing  from 
other  animals  in  the  same  way,  feeling  the  same  essential 
needs,  moved  by  the  same  essential  desires,  and  possessed 
of  the  same  essential  powers. 

Yet  between  man  in  the  lowest  savagery  and  man  in 
the  highest  civilization  how  vast  the  difference  in  the 
ability  of  satisfying  these  needs  and  desires  by  the  use  of 
these  powers.  In  food,  in  raiment,  in  shelter;  in  tools 
and  weapons ;  in  ease  of  movement  and  of  transportation ; 
in  medicine  and  surgery ;  in  music  and  the  representative 
arts ;  in  the  width  of  his  horizon ;  in  the  extent  and  pre- 
cision of  the  knowledge  at  his  service— the  man  who  is 
free  to  the  advantages  of  the  civilization  of  to-day  is  as 
a  being  of  higher  order  compared  to  the  man  who  was 
clothed  in  skins  or  leaves,  whose  habitation  was  a  cave  or 
rude  hut,  whose  best  tool  a  chipped  flint,  whose  boat  a 
hollowed  log,  whose  weapons  the  bow  and  arrows,  and 

19 


20  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

whose  horizon  was  bounded,  as  to  the  past,  by  tribal  tra- 
dition, and  as  to  the  present  by  the  mountains  or  sea-shore 
of  his  immediate  home  and  the  arched  dome  which  seemed 
to  him  to  shut  it  in. 

But  if  we  analyze  the  way  in  which  these  extensions  of 
man's  power  of  getting  and  making  and  knowing  and 
doing  are  gained,  we  shall  see  that  they  come,  not  from 
changes  in  the  individual  man,  but  from  the  union  of 
individual  powers.  Consider  one  of  those  steamships  now 
crossing  the  Atlantic  at  a  rate  of  over  five  hundred  miles 
a  day.  Consider  the  cooperation  of  men  in  gathering 
knowledge,  in  acquiring  skill,  in  bringing  together  mate- 
rials, in  fashioning  and  managing  the  whole  great  struc- 
ture; consider  the  docks,  the  storehouses,  the  branching 
channels  of  trade,  the  correlation  of  desires  reaching  over 
Europe  and  America  and  extending  to  the  very  ends  of 
the  earth,  which  the  regular  crossing  of  the  ocean  by  such 
a  steamship  involves.  Without  this  cooperation  such  a 
steamship  would  not  be  possible. 

There  is  nothing  whatever  to  show  that  the  men  who 
to-day  build  and  navigate  and  use  such  ships  are  one  whit 
superior  in  any  physical  or  mental  quality  to  their  ances- 
tors, whose  best  vessel  was  a  coracle  of  wicker  and  hide. 
The  enormous  improvement  which  these  ships  show  is  not 
an  improvement  of  human  nature ;  it  is  an  improvement 
of  society— it  is  due  to  a  wider,  fuller  union  of  individual 
eiforts  in  the  accomplishment  of  common  ends. 

To  consider  in  like  manner  any  one  of  the  many  and 
great  advances  which  civilized  man  in  our  time  has  made 
over  the  power  of  the  savage,  is  to  see  that  it  has  been 
gained,  and  could  only  have  been  gained,  by  the  widening 
cooperation  of  individual  effort. 

The  powers  of  the  individual  man  do  not  indeed  reach 
their  full  limit  when  maturity  is  once  attained,  as  do  those 
of  the  animal  j  but,  the  highest  of  them  at  least,  are  capable 


Chap.  III.    HOW  MAN'S  POWERS  ABE  EXTENDED.  21 

of  increasing  development  up  to  the  physical  decay  that 
comes  with  age,  if  not  up  to  the  verge  of  the  grave.  Yet, 
at  best,  man's  individual  powers  are  small  and  his  life  is 
short.  What  advances  would  be  possible  if  men  were 
isolated  from  each  other  and  one  generation  separated 
from  the  next  as  are  the  generations  of  the  seventeen-year 
locusts?  The  little  such  individuals  might  gain  during 
their  own  lives  would  be  lost  with  them.  Each  generation 
would  have  to  begin  from  the  starting-place  of  its  prede- 
cessor. 

But  man  is  more  than  an  individual.  He  is  also  a  social 
animal,  formed  and  adapted  to  live  and  to  cooperate  with 
his  fellows.  It  is  in  this  line  of  social  development  that 
the  great  increase  of  man's  knowledge  and  powers  takes 
place. 

The  slowness  with  which  we  attain  the  ability  to  care 
for  ourselves  and  the  qualities  incident  to  our  higher  gifts 
involve  an  overlapping  of  individuals  that  continues  and 
extends  the  family  relation  beyond  the  limits  which  obtain 
among  other  mammalia.  And,  beyond  this  relation,  com- 
mon needs,  similar  perceptions  and  like  desires,  acting 
among  creatures  endowed  with  reason  and  developing 
speech,  lead  to  a  cooperation  of  effort  that  even  in  its 
crudest  forms  gives  to  man  powers  that  place  him  far 
above  the  beasts  arid  that  tends  to  weld  individual  men 
into  a  social  body,  a  larger  entity,  which  has  a  life  and 
character  of  its  own,  and  continues  its  existence  while  its 
components  change,  just  as  the  life  and  characteristics  of 
our  bodily  frame  continue,  though  the  atoms  of  which  it 
is  composed  are  constantly  passing  away  from  it  and  as 
constantly  being  replaced. 

It  is  in  this  social  body,  this  larger  entity,  of  which  in- 
dividuals are  the  atoms,  that  the  extensions  of  human 
power  which  mark  the  advance  of  civilization  are  secured. 
The  rise  of  civilization  is  the  growth  of  this  cooperation 


22  THE  MEANING  OF  POLITICAL  ECONOMY.     Boole  L 

and  the  increase  of  the  body  of  knowledge  thus  obtained 
and  garnered. 

Perhaps  I  can  better  point  out  what  I  mean  by  an  illus- 
tration : 

The  famous  treatise  in  which  the  English  philosopher 
Hobbes,  during  the  revolt  against  the  tyranny  of  the 
Stuarts  in  the  seventeenth  century,  sought  to  give  the 
sanction  of  reason  to  the  doctrine  of  the  absolute  authority 
of  kings,  is  entitled  "  Leviathan."  It  thus  begins : 

Nature,  the  art  whereby  God  hath  made  and  governs  the  world,  is 
by  the  art  of  man,  as  in  many  other  things,  so  in  this  also  imitated, 
that  it  can  make  an  artificial  animal.  .  .  .  For  by  art  is  created  that 
great  Leviathan  called  a  commonwealth  or  state,  in  Latin  civitas, 
which  is  but  an  artificial  man ;  though  of  greater  stature  and  strength 
than  the  natural,  for  whose  protection  and  defense  it  was  intended ; 
and  in  which  the  sovereignty  is  an  artificial  soul,  as  giving  life  and 
motion  to  the  whole  body ;  the  magistrates  and  other  officers  of  judi- 
cature and  execution,  artificial  joints ;  reward  and  punishment,  by 
which  fastened  to  the  seat  of  the  sovereignty  every  joint  and  mem- 
ber is  moved  to  perform  his  duty,  are  the  nerves,  that  do  the  same 
in  the  body  natural ;  the  wealth  and  riches  of  all  the  particular  mem- 
bers, are  the  strength ;  solus  populi,  the  people's  safety,  its  business ; 
counselors  by  whom  all  things  needful  for  it  to  know  are  suggested 
unto  it,  are  the  memory ;  equity  and  laws,  an  artificial  reason  and 
will;  concord,  health;  sedition,  sickness;  and  civil  war,  death. 
Lastly,  the  pacts  and  covenants,  by  which  the  parts  of  this  body 
politic  were  at  first  made,  set  together,  and  united,  resemble  that 
fiat,  or  the  "Let  us  make  man,"  pronounced  by  God  in  the  creation. 

Without  stopping  now  to  comment  further  on  Hobbes's 
suggestive  analogy,  there  is,  it  seems  to  me,  in  the  system 
or  arrangement  into  which  men  are  brought  in  social  life, 
by  the  effort  to  satisfy  their  material  desires— an  integra- 
tion which  goes  on  as  civilization  advances— something 
which  even  more  strongly  and  more  clearly  suggests  the 
idea  of  a  gigantic  man,  formed  by  the  union  of  individual 
men,  than  any  merely  political  integration. 

This  Greater  Leviathan  is  to  the  political  structure  or 
conscious  commonwealth  what  the  unconscious  functions 


Chap.  III.    HOW  MAN'S  POWERS  ABE  EXTENDED.  23 

of  the  body  are  to  the  conscious  activities.  It  is  not  made 
by  pact  and  covenant,  it  grows  j  as  the  tree  grows,  as  the 
man  himself  grows,  by  virtue  of  natural  laws  inherent  in 
human  nature  and  in  the  constitution  of  things ;  and  the 
laws  which  it  in  turn  obeys,  though  their  manifestations 
may  be  retarded  or  prevented  by  political  action  are  them- 
selves utterly  independent  of  it,  and  take  no  note  whatever 
of  political  divisions. 

It  is  this  natural  system  or  arrangement,  this  adjust- 
ment of  means  to  ends,  of  the  parts  to  the  whole  and  the 
whole  to  the  parts,  in  the  satisfaction  of  the  material  de- 
sires of  men  living  in  society,  which,  in  the  same  sense  as 
that  in  which  we  speak  of  the  economy  of  the  solar  system, 
is  the  economy  of  human  society,  or  what  in  English  we 
call  political  economy.  It  is  as  human  units,  individuals 
or  families,  take  their  place  as  integers  of  this  higher  man, 
this  Greater  Leviathan,  that  what  we  call  civilization 
begins  and  advances. 

But  in  this  as  in  other  things,  the  capacity  for  good  is 
also  capacity  for  evil,  and  prejudices,  superstitions,  errone- 
ous beliefs  and  injurious  customs  may  in  the  same  way  be 
so  perpetuated  as  to  turn  what  is  the  greatest  potency  of 
advance  into  its  greatest  obstacle,  and  to  engender  degra- 
dation out  of  the  very  possibilities  of  elevation.  And  it 
is  well  to  remember  that  the  possibilities  of  degradation 
and  deterioration  seem  as  clear  as  the  possibilities  of  ad- 
vance. In  no  race  and  at  no  place  has  the  advance  of  man 
been  continuous.  At  the  present  time,  while  European 
civilization  is  advancing,  the  majority  of  mankind  seem 
stationary  or  retrogressive.  And  while  even  the  lowest 
peoples  of  whom  we  have  knowledge  show  in  some  things 
advances  over  what  we  infer  must  have  been  man's  primi- 
tive condition,  yet  it  is  at  the  same  time  true  that  in  other 
things  they  also  show  deteriorations,  and  that  even  the  most 
highly  advanced  peoples  seem  in  some  things  below  what 
we  best  imagine  to  have  been  as  the  original  state  of  man. 


CHAPTER  IV. 
CIVILIZATION-WHAT  IT  MEANS. 

SHOWING  THAT  CIVILIZATION  CONSISTS  IN  THE  WELDING  OF 
MEN  INTO  THE  SOCIAL  ORGANISM  OR  ECONOMIC  BODY. 

Vagueness  as  to  what  civilization  is— Ghiizot  quoted— Derivation 
and  original  meaning— Civilization  and  the  State— Why  a  word 
referring  to  the  precedent  and  greater  has  been  taken  from  one 
referring  to  the  subsequent  and  lesser. 

THE  word  civilization  is  in  common  use.  But  it  is 
used  with  vague  and  varying  meanings,  which  refer 
to  the  qualities  or  results  that  we  attribute  to  the  thing, 
rather  than  to  the  thing  itself  the  existence  or  possibility 
of  which  we  thus  assume. 

Sometimes  our  expressed  or  implied  test  of  civilization 
is  in  the  methods  of  industry  and  control  of  natural  forces. 
Sometimes  it  is  in  the  extent  and  diffusion  of  knowledge. 
Sometimes  in  the  kindliness  of  manners  and  justice  and 
benignity  of  laws  and  institutions.  Sometimes  it  may  be 
suspected  that  we  use  the  word  as  do  the  Chinese  when 
they  class  as  barbarians  all  humanity  outside  of  the  "  Cen- 
tral Flowery  Kingdom."  And  there  is  point  in  the  satire 
which  tells  how  men  who  had  lost  their  way  in  the  wilder- 
ness, exclaimed  at  length  when  they  reached  a  prison : 
"  Thank  God,  we  are  at  last  in  civilization !  " 

This  difficulty  in  determining  just  what  civilization  is, 
does  not  pertain  to  common  speech  alone,  but  is  felt  by 

24 


Chap.  IF.         CIVILIZATION-WHAT  IT  MEANS.  25 

the  best  writers  oil  the  subject.  Thus  Buckle,  in  the  two 
great  volumes  of  the  general  introduction  to  his  "  History 
of  Civilization  in  England/''  which  was  all  his  untimely 
death  permitted  him  to  complete,  gives  us  his  view  of  what 
civilization  depends  on,  what  influences  it,  what  promotes 
or  retards  it  j  but  does  not  venture  to  say  what  civilization 
is.  And  thus  Guizot,  in  his  "  General  History  of  Civiliza- 
tion in  Modern  Europe,"  says  of  civilization  itself : 

It  is  so  general  in  its  nature  that  it  can  scarcely  be  seized ;  so  com- 
plicated that  it  can  scarcely  be  unraveled ;  so  hidden  as  scarcely  to 
be  discernible.  The  difficulty  of  describing  it,  or  recounting  its  his- 
tory, is  apparent  and  acknowledged ;  but  its  existence,  its  worthiness 
to  be  described  and  to  be  recounted,  is  not  less  certain  and  manifest. 

Yet,  surely,  it  ought  to  be  possible  to  fix  the  meaning  of  a 
word  so  common  and  so  important ;  to  determine  the  thing 
from  which  the  qualities  we  attribute  to  civilization  pro- 
ceed. This  I  shall  attempt,  not  only  because  I  shall:  have 
future  occasion  to  use  the  word,  but  because  of  the  light 
the  effort  may  throw  on  the  matter  now  in  hand,  the 
nature  of  political  economy. 

The  word  civilization  comes  from  the  Latin  civis,  a 
citizen.  Its  original  meaning  is,  the  manner  or  condition 
in  which  men  live  together  as  citizens.  Now  the  relations 
of  the  citizen  to  other  citizens,  which  are  in  their  concep- 
tion peaceable  and  friendly,  involving  mutual  obligations, 
mutual  rights  and  mutual  services,  spring  from  the  rela- 
tion of  each  citizen  to  a  whole  of  which  each  is  an  integral 
part.  That  whole,  from  membership  in  which  proceeds 
the  relationship  of  citizens  to  each  other,  is  the  body 
politic,  or  political  community,  which  we  name  the  state, 
and  which,  struck  by  the  analogy  between  it  and  the 
human  body,  Hobbes  likened  to  a  larger  and  stronger  man 
made  up  by  the  integration  of  individual  men,  and  called 
Leviathan. 


26  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

Yet  it  is  not  this  political  relation,  but  a  relation  like 
it,  that  is  suggested  in  this  word  civilization— a  relation 
deeper,  wider  and  closer  than  the  relation  of  the  citizen  to 
the  State,  and  prior  to  it. 

There  is  a  relation  between  what  we  call  a  civilization 
and  what  we  call  a  state,  but  in  this  the  civilization  is  the 
antecedent  and  the  state  the  subsequent.  The  appearance 
and  development  of  the  body  politic,  the  organized  state, 
the  Leviathan  of  Hobbes,  is  the  mark  of  civilization  already 
in  existence.  Not  in  itself  civilization,  it  involves  and 
presupposes  civilization. 

And  in  the  same  way  the  character  of  the  state,  the 
nature  of  the  laws  and  institutions  which  it  enacts  and 
enforces,  indicate  the  character  of  the  underlying  civiliza- 
tion. For  while  civilization  is  a  general  condition,  and 
we  speak  of  mankind  as  civilized,  half  civilized  or  uncivi- 
lized, yet  we  recognize  individual  differences  in  the  char- 
acteristics of  a  civilization,  as  we  recognize  differences  in 
the  characteristics  of  a  state  or  in  the  characteristics  of  a 
man.  We  speak  of  ancient  civilization  and  modern  civili- 
zation j  of  Asiatic  civilization  and  European  civilization ; 
of  the  Egyptian,  the  Assyrian,  the  Chinese,  the  Indian, 
the  Aztec,  the  Peruvian,  the  Roman  and  the  Greek  civili- 
zations, as  separate  things,  having  such  general  likeness 
to  each  other  as  men  have  to  men,  but  each  marked  by 
such  individual  characteristics  as  distinguish  one  man  from 
other  men.  And  whether  we  consider  them  in  their  grand 
divisions  or  in  their  minor  divisions,  the  line  between  what 
we  call  civilizations  is  not  the  line  of  separation  between 
bodies  politic.  The  United  States  and  Canada,  or  the 
United  States  and  Great  Britain,  are  separate  bodies  politic, 
yet  their  civilization  is  the  same.  The  making  of  the 
Queen  of  Great  Britain  Empress  of  India  does  not  substi- 
tute the  English  civilization  for  the  Indian  civilization  in 
Bengal,  nor  the  Indian  civilization  for  the  English  civiliza- 


r.         CIVILIZATION-WHAT  IT  MEANS.  27 

tion  in  Yorkshire  or  Kent.  Change  in  allegiance  involves 
change  in  citizenship,  but  in  itself  involves  no  change  in 
the  civilization.  Civilization  is  evidently  a  relation  which 
underlies  the  relations  of  the  body  politic  as  the  uncon- 
scious motions  of  the  body  underlie  the  conscious  motions. 

Now,  as  the  relations  of  the  citizen  proceed  essentially 
from  the  relation  of  each  citizen  to  a  whole— the  body  pol- 
itic, or  Leviathan,  of  which  he  is  a  part— is  it  not  clear, 
when  we  consider  it,  that  the  relations  of  the  civilized  man 
proceed  from  his  relations  to  what  I  have  called  the  body 
economic,  or  Greater  Leviathan  ?  It  is  this  body  economic, 
or  body  industrial,  which  grows  up  in  the  cooperation  of 
men  to  supply  their  wants  and  satisfy  their  desires,  that 
is  the  real  thing  constituting  what  we  call  civilization; 
Of  this  the  qualities  by  which  we  try  to  distinguish  what 
we  mean  by  civilization  are  the  attributes.  It  does  indeed, 
I  think,  best  present  itself  to  our  apprehension  in  the 
likeness  of  a  larger  and  greater  man,  arising  out  of  and 
from  the  cooperation  of  individual  men  to  satisfy  their 
desires,  and  constituting,  after  the  evolution  which  finds 
its  crown  in  the  appearance  of  man  himself,  a  new  and 
seemingly  illimitable  field  of  progress. 

This  body  economic,  or  Greater  Leviathan,  always  pre- 
cedes and  always  underlies  the  body  politic  or  Leviathan. 
The  body  politic  or  state  is  really  an  outgrowth  of  the 
body  economic,  in.  fact  one  of  its  organs,  the  need  for 
which  and  appearance  of  which  arises  from  and  with  its 
own  appearance  and  growth.  And  from  this  relation  of 
dependence  upon  the  body  economic,  the  body  politic  can 
never  become  exempt. 

Why,  then,  it  may  be  asked,  is  it  that  we  take  for  the 
greater  and  precedent  a  word  drawn  from  the  lesser  and 
subsequent,  and  find  in  the  word  civilization,  which  ex- 
presses an  analogy  to  the  body  politic,  the  word  that 
serves  us  as  a  name  for  the  body  economic  ?  The  reason 


28  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  L 

of  this  is  worth  noting,  as  it  flows  from  an  important 
principle  in  the  growth  of  human  knowledge.  Things 
that  come  first  in  the  natural  order  are  not  always  first 
apprehended.  As  the  human  eye  looks  out,  but  not  in,  so 
the  human  mind  as  it  scans  the  world  is  apt  to  observe 
what  is  of  the  superstructure  of  things  before  it  observes 
what  is  of  the  foundation. 

The  body  politic  is  more  obvious  to  our  eyes,  and,  so  to 
speak,  makes  more  noise  in  our  ears,  than  the  unseen  and 
silent  body  economic,  from  which  it  proceeds  and  on  which 
it  depends.  Thus,  in  the  intellectual  development  of 
mankind,  it  and  its  relations  are  noticed  sooner  and  receive 
names  earlier  than  the  body  economic.  And  the  words  so 
made  part  of  our  mental  furniture,  afterwards  by  their 
analogies  furnish  us  with  words  needed  to  express  the 
body  economic  and  its  relations  when  later  in  intellectual 
growth  we  come  to  recognizedt.  Thus  it  is  that  while  the 
thing  civilization  must  in  the  natural  order  precede  the 
body  politic  or  state,  yet  when  in  the  development  of 
human  knowledge  we  come  to  recognize  this  thing,  we  take 
to  express  it  and  its  relations  words  already  in  use  as  ex- 
pressive of  the  body  politic  and  its  relations. 

But  without  at  present  pursuing  further  that  record  of 
the  history  of  thought  that  lies  in  the  meaning  of  words, 
let  us  endeavor  to  see  whence  comes  the  integration  of 
men  into  a  body  economic  and  how  it  grows. 


CHAPTER  V. 
THE   ORIGIN  AND  GENESIS  OF  CIVILIZATION. 

SHOWING  THE  NATURE  OF  REASON  j  AND  HOW  IT  IMPELS  TO 
EXCHANGE,  BY  WHICH  CIVILIZATION  DEVELOPS. 

Reason  the  power  of  tracing  causal  relations— Analysis  and  syn- 
thesis— Likeness  and  unlikeness  between  man  and  other  animals 
—Powers  that  the  apprehension  of  causal  relations  gives— Moral 
connotations  of  civilization— But  begins  with  and  increases 
through  exchange — Civilization  relative,  and  exists  in  the  spirit- 
ual. 

MAN  is  an  animal ;  but  an  animal  plus  something  more 
— the  divine  spark  differentiating  him  from  all  other 
animals,  which  enables  him  to  become  a  maker,  and  which 
we  call  reason.  To  style  it  a  divine  spark  is  to  use  a  fit 
figure  of  speech,  for  it  seems  analogous  to,  if  not  indeed 
a  lower  form  of,  the  power  to  which  we  must  attribute  the 
origin  of  the  world ;  and  like  light  and  heat  radiates  and 
enkindles. 

The  essential  quality  of  reason  seems  to  lie  in  the  power 
of  tracing  the  relationship  of  cause  and  effect.  This  power, 
in  one  of  its  aspects,  that  which  proceeds  from  effect  to 
cause,  thus,  as  it  were,  taking  things  apart,  so  as  to  see 
how  they  have  been  put  together,  we  call  analysis.  In 
another  of  its  aspects,  that  which  proceeds  from  cause  to 
effect,  thus,  as  it  were,  putting  things  together,  so  as  to 
see  in  what  they  result,  we  call  synthesis.  In  both  of 


30  THE  MEANING  OF  POLITICAL  ECONOMY.     Boole  I. 

these  aspects,  reason,  I  think,  involves  the  power  of  pic- 
turing things  in  the  mind,  and  thus  making  what  we  may 
call  mental  experiments. 

Whoever  will  take  the  trouble  (and  if  he  has  the  time, 
he  will  find  in  it  pleasure)  to  get  on  friendly  and  intimate 
terms  with  a  dog,  a  cat,  a  horse,  or  a  pig,  or,  still  better,— 
since  these  animals,  though  they  have  four  limbs  like  ours, 
lack  hands,— with  an  intelligent  monkey,  will  find  many 
things  in  which  our  "poor  relations"  resemble  us,  or 
perhaps  rather,  we  resemble  them. 

To  such  a  man  these  animals  will  exhibit  traces  at  least 
of  all  human  feelings— love  and  hate,  hope  and  fear,  pride 
and  shame,  desire  and  remorse,  vanity  and  curiosity, 
generosity  and  cupidity.  Even  something  of  our  small 
vices  and  acquired  tastes  they  may  show.  Goats  that 
chew  tobacco  and  like  their  dram  are  known  on  shipboard, 
and  dogs  that  enjoy  carriage-rides  and  like  to  run  to  fires, 
on  land.  " Bummer"  and  his  client  "Lazarus"  were  as 
well  known  as  any  two-legged  San  Franciscan  some  thirty- 
five  or  forty  years  ago,  and  until  their  skins  had  been 
affectionately  stuffed,  they  were  "deadheads"  at  free 
lunches,  in  public  conveyances  and  at  public  functions. 
I  bought  in  Calcutta,  when  a  boy,  a  monkey  which  all  the 
long  way  home  would  pillow  her  little  head  on  mine  as  I 
slept,  and  keep  off  my  face  the  cockroaches  that  infested 
the  old  Indiaman  by  catching  them  with  her  hands  and 
cramming  them  into  her  maw.  When  I  got  her  home,  she 
was  so  jealous  of  a  little  brother  that  I  had  to  part  with 
her  to  a  lady  who  had  no  children.  And  my  own  children 
had  in  New  York  a  little  monkey,  sent  them  from  Para- 
guay, that  so  endeared  herself  to  us  all  that  when  she  died 
from  over-indulgence  in  needle-points  and  pinheads  it 
seemed  like  losing  a  member  of  the  family.  She  knew 
my  step  before  I  reached  the  door  on  coming  home,  and 
when  it  opened  would  spring  to  meet  me  with  chattering 


Cliap.  V.     OKIGIN  AND  GENESIS  OF  CIVILIZATION.  31 

caresses,  the  more  prolonged  the  longer  I  had  been  away. 
She  leaped  from  the  shoulder  of  one  to  that  of  another  at 
table  j  nicely  discriminating  between  those  who  had  been 
good  to  her  and  those  who  had  offended  her.  She  had  all 
the  curiosity  attributed  to  her  sex  in  man,  and  a  vanity 
most  amusing.  She  would  strive  to  attract  the  attention 
of  visitors,  and  evince  jealousy  if  a  child  called  off  their 
notice.  At  the  time  for  school-children  to  pass  by,  she 
would  perch  before  a  front  window  and  cut  monkey  shines 
for  their  amusement,  chattering  with  delight  at  their 
laughter  and  applause  as  she  sprang  from  curtain  to 
curtain  and  showed  the  convenience  of  a  tail  that  one  may 
swing  by. 

How  much  "human  nature"  there  is  in  animals,  who- 
ever treats  them  kindly  knows.  We  usually  become  most 
intimate  with  dogs.  And  who  that  has  been  really  inti- 
mate with  a  generous  dog  has  not  sympathized  with  the 
children's  wish  to  have  him  decently  buried  and  a  prayer 
said  over  him?  Or  who,  when  he  saw  at  last  the  poor 
beast's  stiffened  frame,  could,  despite  his  accustomed 
philosophy  which  reserves  a  future  life  to  man  alone,  re- 
frain from  a  moment's  hope  that  when  his  own  time  came 
to  cross  the  dark  river  his  faithful  friend  might  greet  him 
on  the  other  shore  ?  And  must  we  say,  Nay  ?  The  title 
by  which  millions  of  men  prefer  to  invoke  the  sacred 
name,  it  is  not  "the  All  Mighty,"  but  "the  Most  Mer- 
ciful." 

One  of  the  most  striking  differences  between  man  and 
the  lower  animals  is  that  which  distinguishes  man  as  the 
unsatisfied  animal.  Yet  I  am  not  sure  that  this  is  in  itself 
an  original  difference ;  an  essential  difference  of  kind.  I 
am,  on  the  contrary,  as  I  come  closely  to  consider  it,  in- 
clined rather  to  think  it  a  result  of  the  endowment  of  man 
with  the  quality  of  reason  that  animals  lack,  than  in  itself 
an  original  difference. 


32  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

For,  on  the  one  side,  we  see  that  men  when  placed  in 
conditions  that  forbid  the  hope  of  improvement  do  become 
almost  if  not  quite  as  stolidly  content  with  no  greater 
satisfactions  than  their  fathers  could  obtain  as  the  mere 
animals  are.  And,  on  the  other  side,  we  see  that,  to  some 
extent  at  least,  the  desires  of  animals  increase  as  oppor- 
tunities for  gratifying  them  are  afforded.  Give  a  horse 
lump-sugar  and  he  will  come  to  you  again  to  get  it,  though 
in  his  natural  state  he  aspires  to  nothing  beyond  the  herb- 
age. The  pampered  lap-dogs  whose  tails  stick  out  from 
warm  coats  on  the  fashionable  city  avenues  in  winter  seem 
to  enjoy  their  clothing,  though  they  could  never  solve  the 
mystery  of  how  to  get  it  on,  let  alone  how  to  make  it. 
They  come  to  want  the  daintiest  food  served  in  china  on 
soft  carpets,  while  dogs  of  the  street  will  fight  for  the 
dirtiest  bone.  I  know  a  cat  in  the  mountains  that  lives 
in  the  woods  all  the  months  when  leaves  are  green,  but 
when  they  turn  and  die  seeks  the  farmer's  hearth.  The 
big  white  puss  that  lies  curled  in  the  soft  chair  beside  the 
stove  in  the  hall  below,  and  who  will  swell  and  purr  with 
satisfaction  when  I  scratch  her  head  and  stroke  her  back 
as  I  pass  down,  hardly  dared  sneak  into  the  house  a  few 
weeks  ago,  but  now  that  she  finds  she  is  welcome  is  content 
with  nothing  less  than  the  softest  couch  and  the  warmest 
fire.  And  the  shaggy  dog  that  likes  so  well  to  sit  in  a  boat 
and  watch  the  water  as  it  plashes  by,  makes  me  wonder 
sometimes  if  he  would  not  want  a  nicely  cushioned  naph- 
tha launch  if  he  could  make  out  how  to  get  one.  Even 
man  is  content  with  the  best  he  can  get  until  he  begins  to 
see  he  can  get  better.  A  handsome  woman  I  have  met, 
who  puts  on  for  ball  or  opera  an  earl's  ransom  in  gems, 
and  must  have  a  cockade  in  her  coachman's  hat  and  bicycle 
tires  on  her  carriage-wheels,  will  tell  you  that  once  her 
greatest  desire  was  for  a  new  wash-tub  and  a  better 
cooking-stove. 


Chap.  V.      ORIGIN  AND  GENESIS  OF  CIVILIZATION.  33 

The  more  we  come  to  know  the  animals  the  harder  we 
find  it  to  draw  any  clear  mental  line  between  them  and 
us,  except  on  one  point,  as  to  which  we  may  see  a  clear 
and  profound  distinction.  This,  that  animals  lack  and 
that  men  have,  is  the  power  of  tracing  effect  to  cause,  and 
from  cause  assuming  effect.  Among  animals  this  want  is 
to  some  extent  made  up  for  by  finer  sense-perceptions  and 
by  the  keener  intuitions  that  we  call  instinct.  But  the  line 
that  thus  divides  us  from  them  is  nevertheless  wide  and 
deep.  Memory,  which  the  animals  share  with  man,  enables 
them  to  some  extent  to  do  again  what  they  have  been  first 
taught  to  do  j  to  seek  what  they  have  found  pleasant,  and 
to  avoid  what  they  have  found  painful.  They  certainly 
have  some  way  of  communicating  their  impressions  and 
feelings  to  others  of  their  kind  which  constitutes  a  rudi- 
mentary language,  while  their  sharper  senses  and  keener 
intuitions  serve  them  in  some  cases  where  men  would  be 
at  fault.  Yet  they  do  not,  even  in  the  simplest  cases,  show 
the  ability  to  "  think  a  thing  out,"  and  the  wiliest  and  most 
sagacious  of  them  may  be  snared  and  held  by  devices  the 
simplest  man  would  with  a  moment's  reflection  "see  his 
way  through."* 

Is  it  not  in  this  power  of  "thinking  things  out,"  of 
"seeing  the  way  through"— the  power  of  tracing  causal 
relations— that  we  find  the  essence  of  what  we  call  rea- 
son, the  possession  of  which  constitutes  the  unmistakable 
difference,  not  in  degree  but  in  kind,  between  man  and  the 
brutes,  and  enables  him,  though  their  fellow  on  the  plane 
of  material  existence,  to  assume  mastery  and  lordship  over 
them  all  ? 

Here  is  the  true  Promethean  spark,  the  endowment  to 

*  I  do  not  of  course  include  the  animals  of  fairy  tale,  nor  the 
superordinary  dogs  that  Herbert  Spencer's  correspondents  write  to 
him  about.  See  Herbert  Spencer's  "Justice,"  Appendix  D,  or  my 
"A  Perplexed  Philosopher,"  p.  285. 


34  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

which  the  Hebrew  Scriptures  refer  when  they  say  that 
God  created  man  in  His  own  image;  and  the  means  by 
which  we,  of  all  animals,  become  the  only  progressive 
animal.  Here  is  the  germ  of  civilization. 

It  is  this  power  of  relating  effect  to  cause  and  cause  to 
effect  which  renders  the  world  intelligible  to  man  ;  which 
enables  him  to  understand  the  connection  of  things  around 
him  and  the  bearings  of  things  above  and  beyond  him  ;  to 
live  not  merely  in  the  present,  but  to  pry  into  the  past 
and  to  forecast  the  future  j  to  distinguish  not  only  what 
are  presented  to  him  through  the  senses,  but  things  of 
which  the  senses  cannot  tell ;  to  recognize  as  through  mists 
a  power  from  which  the  world  itself  and  all  that  therein 
is  must  have  proceeded;  to  know  that  he  himself  shall 
surely  die,  but  to  believe  that  after  that  he  shall  live 
again. 

It  is  this  power  of  discovering  causal  relations  that  en- 
ables him  to  bring  forth  fire  and  call  out  light ;  to  cook 
food ;  to  make  for  himself  coats  other  than  the  skin  with 
which  nature  clothes  him ;  to  build  better  habitations  than 
the  trees  and  caves  that  nature  offers ;  to  construct  tools  j 
to  forge  weapons ;  to  bury  seeds  that  they  may  rise  again 
in  more  abundant  life;  to  tame  and  breed  animals;  to 
utilize  in  his  service  the  forces  of  nature ;  to  make  of  water 
a  highway ;  to  sail  against  the  wind  and  lift  himself  by 
the  force  that  pulls  all  things  down;  and  gradually  to 
exchange  the  poverty  and  ignorance  and  darkness  of  the 
savage  state  for  the  wealth  and  knowledge  and  light  that 
come  from  associated  effort. 

All  these  advances  above  the  animal  plane,  and  all  that 
they  imply  or  suggest,  spring  at  bottom  from  the  power 
that  makes  it  possible  for  a  man  to  tie  or  untie  a  square 
knot,  which  animals  cannot  do ;  that  makes  it  impossible 
that  he  should  be  caught  in  a  figure-4  trap  as  rabbits  and 
birds  are  caught,  or  should  stand  helpless  like  a  bull  or  a 


Chap.  V.     ORIGIN  AND  GENESIS  OF  CIVILIZATION.  35 

horse  that  has  wound  his  tethering-rope  around  a  stake 
or  a  tree,  not  knowing  in  which  way  to  go  to  loose  it. 
This  power  is  that  of  discerning  the  relation  between  cause 
and  effect. 

We  measure  civilization  in  various  ways,  for  it  has 
various  aspects  or  sides;  various  lines  along  which  the 
general  advance  implied  in  the  word  shows  itself— as  in 
knowledge,  in  power,  in  wealth,  in  justice  and  kindliness. 
But  it  is  in  this  last  aspect,  I  think,  that  the  term  is  most 
commonly  used.  This  we  may  see  if  we  consider  that  the 
opposite  of  civilized  is  savage  or  barbarous.  Now  savage 
and  barbarous  refer  in  common  thought  and  implication 
not  so  much  to  material  as  to  moral  conditions,  and  are 
synonyms  of  ferocious  or  cruel  or  merciless  or  inhuman. 
Thus,  the  aspect  of  civilization  most  quickly  apprehended 
in  common  thought  is  that  of  a  keener  sense  of  justice  and 
a  kindlier  feeling  between  man  and  man.  And  there  is 
reason  for  this.  While  an  increased  regard  for  the  rights 
of  others  and  an  increased  sympathy  with  others  is  not 
all  there  is  in  civilization,  it  is  an  expression  of  its  moral 
side.  And  as  the  moral  relates  to  the  spiritual,  this  aspect 
of  civilization  is  the  highest,  and  does  indeed  furnish  the 
truest  sign  of  general  advance. 

Yet  for  the  line  on  which  the  general  advance  primarily 
proceeds,  for  the  manner  in  which  individual  men  are 
integrated  into  a  body  economic  or  greater  man,  we  must 
look  lower.  Let  us  try  to  trace  the  genesis  of  civilization. 

Gifted  alone  with  the  power  of  relating  cause  and  effect, 
man  is  among  all  animals  the  only  producer  in  the  true 
sense  of  the  term.  He  is  a  producer,  even  in  the  savage 
state;  and  would  endeavor  to  produce  even  in  a  world 
where  there  was  no  other  man.  But  the  same  quality  of 
reason  which  makes  him  the  producer,  also,  wherever 
exchange  becomes  possible,  makes  him  the  exchanger. 
And  it  is  along  this  line  of  exchanging  that  the  body 


36  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

economic  is  evolved  and  develops,  and  that  all  the  advances 
of  civilization  are  primarily  made. 

But  while  production  must  have  begun  with  man,  and 
the  first  human  pair  to  appear  in  the  world,  we  may  con- 
fidently infer,  must  have  begun  to  use  in  the  satisfaction 
of  their  wants  a  power  essentially  different  in  kind  from 
that  used  by  animals,  they  could  not  begin  to  use  the 
higher  forms  of  that  power  until  their  numbers  had  in- 
creased. With  this  increase  of  numbers  the  cooperation 
of  efforts  in  the  satisfaction  of  desires  would  begin.  Aided 
at  first  by  the  natural  affections,  it  would  be  carried  be- 
yond the  point  where  these  suffice  to  begin  or  to  continue 
cooperation  by  that  quality  of  reason  which  enables  the 
man  to  see  what  the  animal  cannot,  that  by  parting  with 
what  is  less  desired  in  exchange  for  what  is  more  desired, 
a  net  increase  in  satisfaction  is  obtained. 

Thus,  by  virtue  of  the  same  power  of  discerning  causal 
relations  which  leads  the  primitive  man  to  construct  tools 
and  weapons,  the  individual  desires  of  men,  seeking  satis- 
faction through  exchange  with  their  fellows,  would  operate, 
like  the  microscopic  hooks  which  are  said  to  give  its  felting 
quality  to  wool,  to  unite  individuals  in  a  mutual  coopera- 
tion that  would  weld  them  together  as  interdependent 
members  of  an  organism,  larger,  wider  and  stronger  than 
the  individual  man— the  earlier  and  Greater  Leviathan  that 
I  have  called  the  body  economic. 

With  the  beginning  of  exchange  or  trade  among  men 
this  body  economic  begins  to  form,  and  in  its  beginning 
civilization  begins.  The  animals  do  not  develop  civiliza- 
tion, because  they  do  not  trade.  The  simulacra  of  civili- 
zation which  we  observe  among  some  of  them,  such  as 
ants  and  bees,  proceed  from  a  lower  plane  than  that  of 
reason— from  instinct.  While  such  organization  is  more 
perfect  in  its  beginnings,  for  instinct  needs  not  to  learn 


Chap.  V.      OEIGIN  AND  GENESIS  OF  CIVILIZATION.  37 

from  experience,  it  lacks  all  power  of  advance.  Reason 
may  stumble  and  fall,  but  it  involves  possibilities  of  what 
seem  like  infinite  progression. 

As  trade  begins  in  different  places  and  proceeds  from 
different  centers,  sending  out  the  network  of  exchange 
which  relates  men  to  each  other  through  their  needs  and 
desires,  different  bodies  economic  begin  to  form  and  to 
grow  in  different  places,  each  with  distinguishing  char- 
acteristics which,  like  the  characteristics  of  the  individual 
face  and  voice,  are  so  fine  as  only  to  be  appreciated  rela- 
tively, and  then  are  better  recognized  than  expressed. 
These  various  civilizations,  as  they  meet  on  their  margins, 
sometimes  overlap,  sometimes  absorb,  and  sometimes  over- 
throw one  another,  according  to  a  vitality  dependent  on 
their  mass  and  degree,  and  to  the  manner  in  which  their 
juxtaposition  takes  place. 

We  are  accustomed  to  speak  of  certain  peoples  as  un- 
civilized, and  of  certain  other  peoples  as  civilized  or  fully 
civilized,  but  in  truth  such  use  of  terms  is  merely  relative. 
To  find  an  utterly  uncivilized  people  we  must  find  a  people 
among  whom  there  is  no  exchange  or  trade.  Such  a  people 
does  not  exist,  and,  so  far  as  our  knowledge  goes,  never 
did.  To  find  a  fully  civilized  people  we  must  find  a  people 
among  whom  exchange  or  trade  is  absolutely  free,  and  has 
reached  the  fullest  development  to  which  human  desires  can 
carry  it.  There  is,  as  yet,  unfortunately,  no  such  people. 

To  consider  the  history  of  civilization,  with  its  slow 
beginnings,  its  long  periods  of  quiescence,  its  sudden  flashes 
forward,  its  breaks  and  retrogressions,  would  carry  me 
further  than  I  can  here  attempt.  Something  of  that  the 
reader  may  find  in  the  last  grand  division  of  "Progress 
and  Poverty,"  Book  X.,  entitled,  "The  Law  of  Human 
Progress."  What  I  wish  to  point  out  here  is  in  what 
civilization  essentially  and  primarily  consists. 


38  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

But  this  is  to  be  remembered :  Neither  what  we  speak 
of  as  different  civilizations  nor  yet  what  we  call  civilization 
in  the  abstract  or  general  has  existence  in  the  material  or 
is  directly  related  to  rivers  and  mountains,  or  divisions 
of  the  earth's  surface.  Its  existence  is  in  the  mental  or 
spiritual. 


CHAPTER  VI. 

OF  KNOWLEDGE  AND  THE  GROWTH  OF 
KNOWLEDGE. 

SHOWING   THAT  THE   GROWTH  OF  KNOWLEDGE  IS  BY  COOP- 
ERATION, AND  THAT  IT  INHERES  IN  THE  SOCIETY. 

Civilization  implies  greater  knowledge— This  gain  comes  from  co- 
operation— The  incommunicable  knowing  called  skill — The  com- 
municable knowing  usually  called  knowledge — The  relation  of 
systematized  knowledge  to  the  means  of  storing  knowledge,  to 
skill  and  to  the  economic  body — Illustration  from  astronomy. 

IN  contrasting  man  in  the  civilized  state  with  man  in 
his  primitive  state  I  have  dwelt  most  on  the  gain  in 
the  power  of  gratifying  material  desires,  because  such  gains 
are  most  obvious.  Yet  as  thought  precedes  action,  the 
essential  gain  which  these  indicate  must  be  in  knowledge. 
That  the  ocean  steamship  takes  the  place  of  the  hollow 
log,  the  great  modern  building  of  the  rude  hut,  shows  a 
larger  knowledge  utilized  in  such  constructions. 

To  consider  the  nature  of  this  gain  in  knowledge  is  to 
see  that  it  is  not  due  to  improvement  in  the  individual 
power  of  knowing,  but  to  the  larger  and  wider  cooperation 
of  individual  powers;  to  the  growth  of  that  body  of 
knowledge  which  is  a  part,  or  rather,  perhaps,  an  aspect 
of  the  social  integration  I  have  called  the  body  economic. 
If  we  could  separate  the  individuals  whose  knowledge, 
correlated  and  combined,  is  expressed  in  the  ocean  steam- 
ship or  great  modern  building,  it  is  doubtful  if  their  sepa- 

39 


40  THE  MEANING  OF  POLITICAL  ECONOMY.     Boole  I. 

rate  knowledge  would  suffice  for  more  than  the  construc- 
tions and  tools  of  the  savage. 

The  knowledge  that  comes  closest  to  the  individual  is 
what  we  call  skill,  which  consists  in  knowing  how  to 
govern  the  organs  directly  responsive  to  the  conscious 
will,  so  as  to  bring  about  desired  results.  Whoever,  in 
mature  years,  has  learned  to  do  some  new  thing,  as  for 
instance  to  ride  a  bicycle,  knows  how  slowly  and  painfully 
such  knowledge  is  acquired.  At  first  each  leg  and  foot, 
each  arm  and  hand,  to  say  nothing  of  the  muscles  of  the 
chest  and  neck,  seems  to  need  separate  direction,  which 
the  conscious  mind  cannot  give  so  quickly  and  in  such 
order  as  to  prevent  the  learner  from  falling  off  or  running 
into  what  he  would  avoid.  But  as  the  effort  is  continued, 
the  knowledge  of  how  to  direct  these  muscles  passes  from 
the  domain  of  the  conscious  to  that  of  the  subconscious 
mind,  becoming  part  of  what  we  sometimes  call  the  memory 
of  the  muscles,  and  the  needed  correlation  takes  place  with 
the  will  to  bring  about  the  result,  or  automatically.  For 
a  while,  even  after  one  has  learned  to  hold  on  and  keep  his 
wheel  moving,  the  exertion  needed  will  be  so  great  and  his 
attention  will  be  so  absorbed  in  this,  that  he  can  look 
neither  to  right  nor  to  left,  nor  notice  what  he  passes. 

But  with  continued  effort,  the  knowledge  required  for 
the  proper  movement  of  the  muscles  becomes  so  fully  stored 
in  the  subconscious  memory  that  at  length  the  learner  may 
ride  easily,  indulging  in  other  trains  of  thought  and  notic- 
ing persons  and  scenery.  His  hard-gotten  knowledge  has 
passed  into  skill. 

So  in  learning  to  use  a  typewriter.  We  must  at  first 
find  out,  and  with  a  separate  effort  strike  the  key  for  each 
separate  letter.  But  as  this  knowledge  takes  its  place  in 
the  subconscious  memory,  we  merely  think  the  word,  and 
without  further  conscious  direction,  the  fingers,  as  we  need 
the  letters,  strike  their  keys. 


Cliap.VL  KNOWLEDGE  AND  GROWTH  OF  KNOWLEDGE.    41 

This  is  how  all  skill  is  gained.  We  may  see  it  in  the 
child.  We  may  see  him  gradually  acquiring  skill  in  doing 
things  that  we  have  forgotten  that  we  ourselves  had  to 
learn  how  to  do.  When  a  new  man  comes  into  the  world 
he  seems  to  know  only  how  to  cry.  But  by  degrees,  and 
evidently  in  the  same  way  by  which  so  many  of  us  over 
fifty  have  learned  to  ride  a  bicycle,  he  learns  to  suck  j  to 
laugh ;  to  eat ;  to  use  his  eyes ;  to  grasp  and  hold  things  j 
to  sit  j  to  stand ;  to  walk  j  to  speak ;  and  later,  to  read,  to 
write,  to  cipher,  and  so  on,  through  all  the  kinds  and  de- 
grees of  skill. 

Now,  because  skill  is  that  part  of  knowledge  which 
comes  closest  to  the  individual,  becoming  as  it  were  a  part 
of  his  being,  it  is  the  knowledge  which  is  longest  retained, 
and  is  also  that  which  cannot  be  communicated  from  one 
to  another,  or  so  communicated  only  in  very  small  degree. 
You  may  give  a  man  general  directions  as  to  how  to  ride 
a  bicycle  or  operate  a  typewriter,  but  he  can  get  the  skill 
necessary  to  do  either  only  by  practice. 

As  to  this  part  of  knowledge  at  least,  it  is  clear  that  the 
advances  of  civilization  do  not  imply  any  gain  in  the 
power  of  the  individual  to  acquire  knowledge.  Not  only 
do  antiquities  show  that  in  arts  then  cultivated  the  men  of 
thousands  of  years  ago  were  as  skilful  as  the  men  of  to-day, 
but  we  see  the  same  thing  in  our  contact  with  people  whom 
we  deem  the  veriest  savages,  and  the  Australian  black 
fellow  will  throw  a  boomerang  in  a  way  that  excites  the 
wonder  of  the  civilized  man.  On  the  other  hand,  the 
European  with  sufficient  practice  will  learn  to  handle  the 
boomerang  or  practise  any  of  the  other  arts  of  the  savages 
as  skilfully  as  they,  and  wild  tribes  to  whom  the  horse  and 
firearms  are  first  introduced  by  Europeans  become  excel- 
lent riders  and  most  expert  marksmen. 

It  is  not  in  skill,  but  in  the  knowledge  which  can  be 
communicated  from  one  to  another,  that  the  civilized  man 


42  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

shows  Ms  superiority  to  the  savage.  This  part  of  know- 
ledge, to  which  the  term  knowledge  is  usually  reserved, 
as  when  we  speak  of  knowledge  and  skill,  consists  in  a 
knowing  of  the  relation  of  things  to  other  external  things, 
and  may,  but  does  not  always  or  necessarily,  involve  a 
knowing  of  how  to  modify  those  relations.  This  know- 
ledge, since  it  is  not  concerned  with  the  government  of.  the 
organs  directly  responsive  to  the  conscious  will,  does  not 
come  as  close  to  the  individual  as  skill,  but  is  held  rather 
as  a  possession  of  the  organ  of  conscious  memory,  than  as 
a  part  of  the  individual  himself.  While  thus  subject  to 
loss  with  the  weakening  or  lapse  of  that  organ,  it  is  also 
thus  communicable  from  one  to  another. 

Now,  this  is  the  knowledge  which  constitutes  the  body 
of  knowledge  that  so  vastly  increases  with  the  progress  of 
civilization.  Being  held  in  the  memory,  it  is  transferable 
by  speech ;  and  as  the  development  of  speech  leads  to  the 
adoption  of  means  for  recording  language,  it  becomes 
capable  of  more  permanent  storage  and  of  wider  and  easier 
transferability— in  monuments,  manuscripts,  books,  and 
so  on. 

This  ability  to  store  and  transmit  knowledge  in  other 
and  better  ways  than  in  the  individual  memory  and  in 
individual  speech,  which  comes  with  the  integration  of 
individual  men  in  the  social  body  or  body  economic,  is 
of  itself  an  enormous  gain  in  the  advance  of  the  sum  of 
knowledge.  But  the  gain  in  other  and  allied  directions 
that  comes  from  the  larger  and  closer  integration  of  indi- 
viduals in  the  social  man  is  greater  still.  Of  the  sys- 
tematized knowledges,  that  which  we  call  astronomy  was 
probably  one  of  the  earliest.  Consider  the  first  star-gazers, 
who  with  no  instrument  of  observation  but  the  naked  eyes, 
and  no  means  of  record  save  the  memory,  saw  by  watch- 
ing night  after  night  related  movements  in  the  heavenly 
bodies.  How  little  even  of  their  own  ability  to  gather  and 


Chap.  VI.  KNOWLEDGE  AND  GROWTH  OF  KNOWLEDGE.    43 

store  knowledge  could  they  apply  to  the  getting  of  such 
knowledge.  For  until  civilization  had  passed  its  first 
stages,  the  knowledge  and  skill  required  to  satisfy  their 
own  material  needs  must  have  very  seriously  lessened  the 
energy  that  could  be  applied  to  the  gaining  of  any  other 
knowledge. 

Compare  with  such  an  observer  of  the  stars,  the  star- 
gazer  who  watches  now  in  one  of  the  great  modern  observa- 
tories. Consider  the  long  vistas  of  knowledge  and  skill, 
of  experiment  and  meditation  and  effort,  that  are  involved 
in  the  existence  of  the  building  itself,  with  its  mechanical 
devices;  in  the  great  lenses;  in  the  ponderous  tube  so 
easily  adjusted ;  in  the  delicate  instruments  for  measuring 
time  and  space  and  temperature ;  in  the  tables  of  logarithms 
and  mechanical  means  for  effecting  calculations;  in  the 
lists  of  recorded  observations  and  celestial  atlases  that  may 
be  consulted ;  in  the  means  of  communicating  by  telegraph 
and  telephone  with  other  observers  in  other  places,  that 
now  characterize  a  well-appointed  observatory,  and  in  the 
means  and  appliances  for  securing  the  comfort  and  freedom 
from  distraction  of  the  observer  himself !  To  consider  all 
these  is  to  begin  to  realize  how  much  the  cooperation  of 
other  men  contributes  to  the  work  of  even  such  a  special- 
ized individual  as  he  who  watches  the  stars. 


CHAPTER  VII. 

OF    SEQUENCE,   CONSEQUENCE  AND   LAWS  OF 
NATURE. 

SHOWING  THE  PROPER  MEANING  OF  SEQUENCE  AND  OF  CON- 
SEQUENCE, AND  WHY  WE  SPEAK  OF  LAWS  OF  NATURE. 

Coexistence  and  succession— Sequence  and  consequence— Causes  in 
series;  names  for  them— Our  direct  knowledge  is  of  spirit- 
Simplest  perception  of  causal  relation — Extensions  of  this — The 
causal  search  unsatisfied  till  it  reaches  spirit— And  finds  or  as- 
sumes intent— Early  evidences  of  this— Why  we  must  assume  a 
superior  spirit. —Evidences  of  intent— The  word  nature  and  its 
implication  of  will  or  spirit— The  word  law— The  term  "law  of 
nature." 

WHETHER  all  our  knowledge  of  the  relations  of 
things  in  the  external  world  comes  to  us  primarily 
by  experience  and  through  the  gates  of  the  senses,  or 
whether  there  is  some  part  of  such  knowledge  of  which 
we  are  intuitively  conscious  and  which  belongs  to  our 
human  nature  as  its  original  endowment,  are  matters  as 
to  which  philosophers  are,  and  probably  always  will  be,  at 
variance.  But  into  such  discussions,  mainly  verbal  as 
they  are,  it  is  needless  for  us  to  enter.  For  what  concerns 
us  here  the  distinctions  made  in  ordinary  perceptions  and 
common  speech  will  suffice. 

In  the  phenomena  presented  to  him,  man  must  early 
notice  two  kinds  of  relation.    Some  things  show  themselves 

44 


Chap.  VII.  OF   THE  LAWS   OF   NATURE.  45 

with  other  things,  and  some  things  follow  other  things. 
These  two  kinds  of  relation  we  call  relations  of  coexistence, 
and  relations  of  succession  or  sequence.  Since  what  con- 
tinues is  not  so  apt  to  attract  our  attention  as  what 
changes,  it  is  probable  that  the  first  of  these  two  relations 
to  be  noticed  is  that  of  succession.  Light  comes  with  the 
appearance  of  ihe  luminous  bodies  of  the  firmament,  and 
darkness  with  their  disappearance.  Night  succeeds  day, 
and  day  night  j  spring  the  winter,  and  summer  the  spring  j 
the  leaf,  the  bud ;  and  wind  and  rain  the  heavy  threaten- 
ing cloud.  The  approach  to  fire  is  followed  by  a  pleasant 
sensation  as  we  get  close  enough  to  it,  and  by  a  most  painful 
sensation  if  we  get  too  close.  The  eating  of  some  things 
is  succeeded  by  satisfaction;  the  eating  of  other  things 
by  pain. 

But  to  note  the  relation  of  things  in  succession  does  not 
content  man.  The  essential  quality  of  reason,  the  power 
of  discerning  causal  relations,  leads  him  to  ask  why  one 
thing  follows  another,  and  in  the  relation  of  sequence  to 
assume  or  to  seek  for  a  relation  of  con-sequence. 

Let  us  fix  in  our  minds  the  meaning  of  these  two  words. 
For  even  by  usually  careful  writers  one  of  them  is  some- 
times used  when  the  other  is  really  meant,  which  brings 
about  confusion  of  thought  where  precision  is  needed. 

The  proper  meaning  of  sequence  is  that  which  follows 
or  succeeds.  The  proper  meaning  of  consequence  is  that 
which  follows  from.  To  say  that  one  thing  is  a  sequence 
of  another,  is  to  say  that  the  one  has  to  the  other  a  relation 
of  succession  or  coming  after.  To  say  that  one  thing  is  a 
consequence  of  another,  is  to  say  that  the  one  has  to  the 
other  a  relation  not  merely  of  succession,  but  of  necessary 
succession,  the  relation  namely  of  effect  to  cause. 

Now  of  the  sequences  which  we  notice  in  external  nature, 
some  are  variable,  that  is  to  say,  they  do  not  always  follow 
what  is  given  as  the  antecedent,  while  some  are  invariable, 


46  THE   MEANING  OF  POLITICAL  ECONOMY.     Boole  I. 

that  is  to  say,  they  always  follow  what  is  given  as  the 
antecedent.  As  to  these  invariable  sequences,  which  we 
properly  call  consequences,  we  give  a  name  to  the  causal 
connection  between  what  we  apprehend  as  effect  and  what 
we  assume  as  cause  by  calling  it  a  law  of  nature.  What 
we  mean  by  this  term  is  a  matter  too  important  to  be  left 
in  the  uncertainty  and  confusion  with  which  it  is  treated 
in  the.  standard  economic  works.  Let  us  therefore,  before 
beginning  to  use  the  term,  try  to  discover  how  it  has  come 
into  use,  that  we  may  fully  understand  it. 

When,  proceeding  from  what  we  apprehend  as  effect  or 
consequence,  we  begin  to  seek  cause,  it  in  most  cases  hap- 
pens that  the  first  cause  we  find,  as  accounting  for  the 
phenomena,  we  soon  come  to  see  to  be  in  itself  an  effect 
or  consequence  of  an  antecedent  which  to  it  is  cause. 
Thus  our  search  for  cause  begins  again,  leading  us  from 
one  link  to  another  link  in  the  chain  of  causation,  until 
we  come  to  a  cause  which  we  can  apprehend  as  capable  of 
setting  in  motion  the  series  of  which  the  particular  result 
is  the  effect  or  consequence. 

In  a  series  of  causes,  what  we  apprehend  as  the  begin- 
ning cause  is  sometimes  called  " primary  cause"  and 
sometimes  "  ultimate  cause ;  n  while  "  final  cause,"  which 
has  the  meaning  of  purpose  or  i-ntent,  lies  deeper  still. 
This  use  of  seemingly  opposite  names  for  the  same  thing 
may  at  first  puzzle  others  as  at  first  it  puzzled  me.  But 
it  is  explained  when  we  remember  that  what  is  first  and 
what  last  in  a  chain  or  series  depends  upon  which  end  we 
start  from.  Thus,  when  we  proceed  from  cause  towards 
effect,  the  beginning  cause  comes  first,  and  is  styled  the 
"  primary  cause."  But  when  we  start  from  effect  to  seek 
cause,  as  is  usually  the  case,  for  we  can  know  cause  as 
cause  only  when  it  lies  in  our  own  consciousness,  the 
cause  nearest  the  result  comes  first,  and  we  call  it  the 
"  proximate  cause ;  "  and  what  we  apprehend  as  the  begin- 


Chap.  VII.  OF   THE  LAWS   OF   NATURE.  47 

ning  cause  is  found  last,  and  we  call  it  the  "  ultimate  "  or 
"  efficient  cause/'  or,  at  least  where  an  intelligent  will  is 
assumed,  as  the  all-originator,  the  "final  cause;"  while 
those  which  lie  between  either  end  of  the  chain  are  styled, 
sometimes  "secondary,"  and  sometimes  "intermediate 
causes." 

Now  the  only  way  in  which  we  can  hope  to  discover 
what  to  us  is  yet  unknown  is  by  reasoning  to  it  from  what 
to  us  is  known.  What  we  know  most  directly  and  imme- 
diately is  that  in  us  which  feels  and  wills  j  that  which  to 
distinguish  from  our  own  organs,  parts  or  powers  we  call 
the  ego,  or  I ;  that  which  distinguishes  us,  ourselves,  from 
the  external  world,  and  which  is  included  in  the  element 
or  factor  of  the  world  that  in  Chapter  I.  we  called  spirit. 

Man  himself,  in  outward  and  tangible  form  at  least,  is 
comprehended  in  nature,  even  in  what,  when  we  make  the 
distinction  between  subjective  and  objective,  we  call  ex- 
ternal nature.  His  body  is  but  a  part  of  the,  to  us,  inde- 
structible matter,  and  the  motion  which  imbues  it  and 
through  which  he  may  modify  external  things,  is  but  part 
of  the,  to  us,  indestructible  energy  which  existed  in  nature 
before  man  was,  and  which  will  remain,  nothing  less  and 
nothing  more,  after  he  is  gone.  As  I  brought  into  the 
world  no  matter  or  motion,  but  from  the  time  of  my  first 
tangible  existence  as  a  germ  or  cell  have  merely  used  the 
matter  and  motion  already  here,  so  I  take  nothing  away 
when  I  depart.  "Whether,  when  I  am  done  with  it,  my 
body  be  cremated  or  buried  or  sunk  in  the  depths  of  the 
sea,  the  matter  which  gave  it  form  and  the  energy  which 
gave  it  movement  do  not  cease  to  be,  but  continue  to  exist 
and  to  act  in  other  forms  and  other  expressions. 

That  which  really  distinguishes  man  from  external  na- 
ture ;  that  which  seems  to  come  into  the  world  with  the 
dawning  of  life  and  to  depart  from  it  with  death,  is  that 
whose  identity  I  recognize  as  "  me,"  through  all  changes 


48  THE  MEANING  OF  POLITICAL  ECONOMY.     Bhok  I. 


of  matter  and  motion.  It  is  this  which  not  only  receives 
the  impressions  brought  to  it  through  the  senses,  but  by 
the  use  of  the  power  we  call  imagination  contemplates 
itself,  as  one  may  look  at  his  own  face  in  a  mirror.  In 
this  way  the  ego  or  I  of  man  may  reason,  not  only  upon 
the  phenomena  of  the  external  world  as  presented  to  it 
through  the  senses,  but  also  upon  its  own  nature,  its  own 
powers,  and  its  own  activities,  and  regard  the  world,  ex- 
ternal and  internal,  as  a  whole,  having  for  its  components 
not  merely  matter  and  energy,  but  also  spirit. 

Whatever  doubts  any  one  may  entertain  or  profess  to 
entertain  of  the  existence  of  what  we  have  called  spirit, 
can  come  only,  I  think,  from  a  confusion  in  words.  For 
the  one  thing  of  which  each  of  us  must  be  most  certain  is 
that  "  I  am."  And  it  is  through  this  assurance  of  our  own 
existence  that  we  derive  certainties  of  all  other  existence. 

The  simplest  causal  relation  we  perceive  is  that  which 
we  find  in  our  own  consciousness.  I  scratch  my  head,  I 
slap  my  leg,  and  feel  the  effects.  I  drink,  and  my  thirst  is 
quenched.  Here  we  have  perhaps  the  closest  connection 
between  consequence  and  cause.  The  feeling  of  head  or 
leg  or  stomach,  which  here  is  consequence,  transmitted 
through  sense  to  the  consciousness,  finds  in  the  direct 
perceptions  of  the  same  consciousness,  the  cause— an 
exertion  of  the  will.  Or,  reversely,  the  conscious  exertion 
of  the  will  to  do  these  things  produces  through  the  senses 
a  consciousness  of  result.  How  this  connection  takes  place 
we  cannot  really  tell.  When  we  get  to  that,  the  scientist 
is  as  ignorant  as  the  savage.  Yet,  savage  or  scientist,  we 
all  know,  because  we  feel  the  relation  in  such  cases  between 
cause  and  consequence. 

Passing  beyond  the  point  where  both  cause  and  effect 
are  known  by  consciousness,  we  carry  the  certainty  thus 
derived  to  the  explanation  of  phenomena  as  to  which  cause 
and  effect,  one  or  both,  lie  beyond  consciousness.  I  throw 


Chap.  VII.  OF   THE   LAWS   OF   NATUKE.  49 

a  stone  at  a  bird  and  it  falls.  This  result,  the  fall  of  the 
bird,  is  made  known  to  me  indirectly  through  my  sense  of 
sight,  and  later  when  I  pick  it  up,  by  my  sense  of  touch. 
The^blrd  falls  because  the  stone  hit  it.  The  stone  hit  it 
because  put  in  motion  by  the  movement  of  my  hand  and 
arm.  And  the  movement  of  my  hand  and  arm  was  be- 
cause of  my  exertion  of  will,  known  to  me  directly  by 
consciousness. 

What  we  apprehend  as  the  beginning  cause  in  any  series, 
whether  we  call  it  primary  cause  or  final  cause,  is  always 
to  us  the  cause  or  sufficient  reason  of  the  particular  result. 
And  this  point  in  causation  at  which  we  rest  satisfied  is 
that  which  implies  tte  element  of  spirit,  the  exertion  of 
will.  For  it  is  of  the  nature  of  human  reason  never  to 
rest  content  until  it  can  come  to  something  that  may  be 
conceived  of  as  acting  in  itself,  and  not  merely  as  a 
consequence  of  something  else  as  antecedent,  and  thus 
be  taken  as  the  cause  of  the  result  or  consequence  from 
which  the  backward  search  began.  Thus,  in  our  instance, 
leaving  out  intermediate  links  in  the  chain  of  causation, 
and  proceeding  at  once  from  result  to  ultimate  cause,  or 
sufficient  reason,  we  say  correctly  that  the  bird  fell  because 
I  hit  it— that  is,  because  I  exerted  in  an  effective  way  the 
will  to  hit  it. 

But  I  know,  by  consciousness,  that  in  me  the  exertion 
of  will  proceeds  from  some  motive  or  desire.  And  reason- 
ing from  what  I  know  to  explain  what  I  wish  to  discover, 
I  explain  similar  acts  in  others  by  similar  desires. 

So,  if  one  man  brain  another  by  striking  him  with  a 
club,  or  bring  about  his  death  more  gradually  by  giving 
him  a  slow  poison,  we  should  feel  that  we  were  being  played 
with  and  our  intelligence  insulted  if  on  asking  the  cause 
of  death  we  were  told  it  was  because  a  club  struck  him, 
or  because  breath  failed  him.  We  are  not  satisfied  until 
we  know  what  will  was  exerted  to  put  into  action  the 


50  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  1. 

proximate  causes  of  the  result.  Nor  does  this  completely 
satisfy  us.  After  we  know  the  how,  we  are  apt  to  ask  the 
why— the  purpose  or  motive  that  prompted  this  exertion 
of  will.  It  is  not  till  we  get  some  answer  to  this  that  we 
feel  completely  satisfied. 

And  thus,  we  sometimes  make  a  still  shorter  cut  in  our 
causal  explanation,  by  dropping  will  itself,  and  speaking 
of  the  desire  which  prompts  to  the  exertion  6f  will  as  the 
cause  of  an  effect.  I  see  another  walk  or  run  or  climb  a 
tree.  From  what  I  know  of  the  causes  of  nty  own  acts,  I 
recognize  in  this  an  exertion  of  will  prompteq.  by  desire— 
the  tangible  manifestation  of  an  intent ;  and  say,  he  walks 
or  runs  or  climbs  the  tree  because  he  wants  to  get  or  do 
or  avoid  something.  So  when  we  see  the  bird  fly,  the  fish 
swim,  the  mole  or  gopher  burrow  in  the  ground,  we  also 
recognize  in  their  acts  similar  intent— the  exertion  of  will 
prompted  by  desire. 

Now,  this  motive  or  intent  or  purpose  or  desire  to  bring 
about  an  end,  which  sets  an  efficient  cause  to  work,  was 
recognized  by  Aristotle,  and  the  logicians  and  meta- 
physicians who  so  long  followed  him,  as  properly  a  cause, 
and  a  beginning  cause,  and  called  in  their  terminology  the 
"  final  cause."  This  term  has  now,  however,  become  limited 
in  its  use  to  the  idea  of  purpose  or  intent  in  the  mind  of 
the  Supreme  Being,  and  the  "  doctrine  of  final  causes,"  now 
largely  out  of  fashion,  is  understood  to  mean  the  doctrine 
which,  as  the  last  or  final  explanation  of  the  existence  and 
order  of  the  world,  seeks  to  discover  the  purpose  or  intent 
of  the  Creator.  The  argument  from  the  assumption  of 
what  are  now  called  final  causes  for  the  existence  of  an 
intelligent  Creator  is  called  the  "  teleological  argument," 
and  is  by  those  who  have  the  vogue  in  modern  philosophy 
regarded  with  suspicion,  if  not  with  contempt.  Neverthe- 
less, the  recognition  of  purpose  or  intent  as  a  final  or 
beginning  cause  is  still  to  be  found  in  that  homely  logic 


Chap.VIL  OF   THE   LAWS  OF   NATURE.  51 

that  fills  the  common  speech  of  ordinary  people  with 
"  becauses." 

How  early  and  how  strong  is  the  disposition  to  seek 
cause  in  the  exertion  of  y/ill  prompted  by  desire  is  shown 
in  the  prattle  of  children,  in  folk-lore  and  fairy  tales.  We 
are  at  first  apt  to  attribute  even  to  what  we  afterwards 
learn  are  inanimate  things  the  exertion  of  will  and  the 
promptings  of  desire  such  as  we  find  in  our  own  conscious- 
ness, and  to  say,  not  as  figures  of  speech,  but  as  recogni- 
tions of  cause,  that  the  sun  smiles  and  the  clouds  threaten 
and  the  wind  blows  for  this  or  that  purpose  or  with  this 
or  that  intent. 

And  in  the  earliest  of  such  recognitions  we  find  the 
moral  element,  which  belongs  alone  to  spirit.  "What 
mother  has  not  soothed  her  child  by  threatening  or  pre- 
tending to  whip  the  naughty  chair  or  bad  stone  that  caused 
her  little  girl  or  boy  to  stumble,  and  has  not  held  the  little 
thing  in  rapt  silence  with  stories  of  talking  animals  and 
thinking  trees?  But  as  we  look  closer,  we  see  that  the 
power  of  reason  is  not  in  animals,  nor  volition  in  sticks 
and  stones.  Yet  still  seeking  cause  behind  effect,  and  not 
satisfied  that  we  have  found  cause  until  we  have  come  to 
spirit,  we  find  rest  for  a  while  by  accounting  for  effects 
that  we  cannot  trace  to  will  in  men  or  animals,  on  the 
assumption  of  will  in  supersensible  forms,  and  thus  gratify 
the  longing  of  the  reason  to  discover  cause,  by  peopling 
rivers  and  mountains  and  lakes  and  seas  and  trees  and 
seasons  with  spirits  and  genii,  and  fairies  and  goblins,  and 
angels  and  devils,  and  special  gods. 

Yet,  in  and  through  this  stage  of  human  thought  grows 
the  apprehension  of  an  order  and  co-relation  in  things, 
which  we  can  understand  only  by  assuming  unity  of  will 
and  comprehensiveness  of  intent— of  an  all-embracing 
system  or  order  which  we  personify  as  Nature,  and  of  a 
great  "  I  am  "  from  whose  exertion  of  will  all  things  visible 


52  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

and  invisible  proceed,  and  which  is  the  first  or  all-begin- 
ning cause.  In  every  direction  the  effort  of  the  reason  to 
seek  the  cause  of  what  it  perceives,  forces  this  upon  the 
thoughtful  mind. 

The  bird  flies  because  it  wants  to  fly.  In  this  will  or 
spirit  of  the  bird  we  find  an  ultimate  cause  or  sufficient 
reason  to  satisfy  us  so  far  as  such  action  is  concerned. 
But  probably  no  man  ever  lived,  and  certainly  no  child, 
who,  seeing  the  easy  sweep  of  birds  through  the  open 
highways  of  air,  has  not  felt  the  wish  to  do  likewise.  Why 
does  not  the  man  also  fly  when  he  wants  to  fly!  We 
answer,  that  while  the  bird's  bodily  structure  permits  of 
the  gratification  of  a  will  to  fly,  the  man's  bodily  structure 
does  not.  But  what  is  the  reason  of  this  difference  ?  Here 
we  come  to  a  sphere  where  we  can  no  longer  find  the  cause 
of  result  in  the  individual  will.  Seeking  still  for  will,  as 
the  only  final  explanation  of  cause,  we  are  compelled  to 
assume  a  higher  and  more  comprehensive  will  or  spirit, 
which  has  given  to  the  bird  one  bodily  structure,  to  the 
man  another. 

Or  take  the  man  himself.  The  child  cries  because  it 
wants  to  cry  and  laughs  because  it  wants  to  laugh.  But 
that  its  teeth  begin  to  come  at  the  proper  age— is  it  be- 
cause it  wants  teeth  ?  In  one  sense,  yes !  When  its  teeth 
begin  to  come  it  begins  to  need  teeth  j  or  rather  will  shortly 
begin  to  need  teeth,  to  fit  for  its  stomach  the  more  solid 
food  it  will  then  require.  But  in  another,  and  in  what  we 
are  discussing,  the  real  sense,  no !  The  need  for  teeth 
when  they  begin  to  come  is  not  a  need  of  the  child  as  it 
then  is,  but  a  need  of  the  child  as  it  will  in  future  be ;  a 
totally  different  being  so  far  as  consciousness  is  concerned. 
The  yet  sucking  child  can  no  more  want  teeth,  in  the  sense 
of  desiring  teeth,  than  the  adult  can  want  to  have  those 
teeth  pulled  out  for  the  sake  of  the  pulling.  The  coming 
of  teeth  is  not  pleasant,  but  painful— seemingly  more 


Chap.VII.  OF  THE  LAWS  OF  NATURE.  63 

painful  and  probably  more  dangerous  than  is  the  pulling 
of  teeth  by  modern  dentistry.  It  is  clearly  not  by  the 
will  of  the  child  that  we  can  explain  the  coming  of  teeth. 
Nor  yet  can  we  explain  it  by  the  will  of  the  mother.  She 
may  desire  that  the  child's  teeth  should  come.  But  she 
cannot  make  her  will  effective  in  any  larger  degree  than 
by  rubbing  the  child's  gums.  Nor  can  the  most  learned 
physician  help  her  further  than  by  lancing  them,  should 
they  seriously  swell.  To  find  a  sufficient  cause  for  this 
effect,  we  are  compelled  to  assume  a  higher  will  and  more 
comprehensive  purpose  than  that  of  man ;  a  will  conscious 
from  the  very  first  of  what  will  yet  be  needed,  as  well  as 
of  what  already  is  needed. 

The  things  that  show  most  clearly  the  adaptation  of 
means  to  ends,  so  that  we  can  at  once  understand  their 
genesis  and  divine  their  cause,  are  things  made  by  man, 
such  as  houses,  clothing,  tools,  adornments,  machines  ;  in 
short,  what  we  call  human  productions.  These,  as  evincing 
the  adaptation  of  means  to  ends,  have  an  unmistakable 
character.  The  coming  upon  a  piece  of  clothing,  or  a 
brooch  or  ring,  or  tomahawk  or  bow,  or  the  embers  and 
fragments  of  a  cooked  meal,  would  have  been  as  quick  and 
even  surer  proof  of  the  presence  of  man  on  his  supposed 
desert  island  than  were  to  Robinson  Crusoe  the  footprints 
in  the  sand.  For  of  all  the  beings  that  our  senses  give  us 
knowledge  of,  man  is  the  only  one  that  in  himself  has  the 
power  of  adapting  means  to  ends  by  taking  thought. 

Yet,  so  soon  as  man  looks  out,  he  finds  in  the  world 
itself  evidences  of  the  same  power  of  adapting  means  to 
ends  that  characterize  his  own  works.  Hence,  recognizing 
in  the  sum  of  perceptible  things— exclusive  of  himself,  or 
rather  of  his  essential  principle  or  ego,  but  inclusive,  not 
merely  of  his  bodily,  but  also  of  his  mental  frame— a  system 
or  whole,  composed  of  related  parts,  he  personifies  it  in 
thought  and  calls  it  Nature. 


64  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  1. 

Still,  while  we  personify  this,  which  is  to  our  apprehen- 
sion the  greatest  of  systems,  and  give  to  it  in  our  English 
speech  the  feminine  gender,  it  is,  I  think,  as  sailors  per- 
sonify a  ship,  or  engine-drivers  a  locomotive.  That  is  to 
say,  the  general  perception  of  the  sum  of  related  parts  or 
system,  that  we  call  Nature,  does  not  include  the  idea  of 
the  originating  will,  or  first  or  final  cause  of  all.  That, 
we  conceive  of  as  something  essentially  distinct  from 
Nature,  though  animating  Nature,  and  give  it  another 
name,  such  as  Great  Spirit,  or  Creator,  or  God.  Those 
who  contend  that  Nature  is  all,  and  that  there  is  nothing 
above  or  beyond  or  superior  to  Nature,  do  so,  I  think,  by 
confounding  two  distinct  conceptions,  and  using  the  word 
Nature  as  meaning  what  is  usually  distinguished  by  the 
word  God. 

We  all,  indeed,  frequently  use  the  word  Nature  to 
avoid  the  necessity  of  naming  that  which  we  feel  to  be 
unnamable,  in  the  sense  of  being  beyond  our  comprehen- 
sion, and  therefore  beyond  our  power  of  defining.  Yet  I 
think  that  not  merely  the  almost  universal,  but  the  clearest, 
and  therefore  best,  perceptions  of  mankind,  really  dis- 
tinguish what  we  call  Nature  from  what  we  call  God,  just 
as  we  distinguish  the  ship,  or  other  machine,  that  we  per- 
sonify, from  the  will  which  we  recognize  as  exerted  in  its 
origination  and  being ;  and  that  at  the  bottom  our  idea  is 
that  of  Pope : 

All  are  but  parts  of  one  stupendous  whole, 
Whose  body  Nature  is,  and  God  the  soul. 

It  is  from  this  conception  of  Nature  as  expressing  or  as 
animated  by  the  highest  will,  that  we  derive,  I  think,  the 
term  "  law  of  Nature." 

We  come  here  to  another  instance  of  the  application  to 
greater  things  of  names  suggested  by  the  less.  In  original 
meaning,  the  word  law  refers  to  human  will,  and  is  the 


Chap.ni.  OF   THE  LAWS   OF   NATURE.  55 

name  given  to  a  command  or  rule  of  conduct  imposed 
by  a  superior  upon  an  inferior,  as  by  a  sovereign  or  state 
upon  those  subject  to  it.  At  first  the  word  law  doubtless 
referred  only  to  human  law.  But  when,  later  in  intellec- 
tual development,  men  came  to  note  invariable  coexis- 
tences and  sequences  in  the  relations  of  external  things, 
they  were,  of  the  mental  necessity  already  spoken  of,  com- 
pelled to  assume  as  cause  a  will  superior  to  human  will, 
and  adapting  the  word  they  were  wont  to  use  for  the 
highest  expression  of  human  will,  called  them  laws  of 
Nature. 

Whatever  we  observe  as  an  invariable  relation  of  things, 
of  which  in  the  last  analysis  we  can  affirm  only  that  "  it 
is  always  so,"  we  call  a  law  of  Nature.  But  though  we  use 
this  phrase  to  express  the  fact  of  invariable  relation, 
something  more  than  this  is  suggested.  The  term  itself 
involves  the  idea  of  a  causative  will.  As  John  Stuart  Mill, 
trained  to  analysis  from  infancy,  and  from  infancy  exempt 
from  theological  bias,  says : 

The  expression  "law  of  Nature  "  is  generally  employed  by  scientific 
men  with  a  sort  of  tacit  reference  to  the  original  sense  of  the  word 
law,  namely,  the  expression  of  the  will  of  a  superior— the  superior, 
in  this  instance,  being  the  Ruler  of  the  universe. 

Thus,  then,  when  we  find  in  Nature  certain  invariable 
sequences,  whose  cause  of  being  transcends  the  power  of 
the  will  testified  to  by  our  own  consciousness— such,  for 
instance,  as  that  stones  and  apples  always  fall  towards  the 
earth ;  that  the  square  of  a  hypothenuse  is  always  equal  to 
the  sum  of  the  squares  of  its  base  and  perpendicular ;  that 
gases  always  coalesce  in  certain  definite  proportions ;  that 
one  pole  of  the  magnet  always  attracts  what  the  other 
always  repels;  that  the  egg  of  one  bird  subjected  to  a 
certain  degree  of  warmth  for  a  certain  time  brings  forth  a 
chick  that  later  will  clothe  itself  with  plumage  of  a  certain 


56  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

kind  and  color,  and  the  egg  of  another  bird  under  the  same 
conditions  brings  forth  a  chick  of  a  different  kind ;  that  at 
a  certain  stage  of  infancy  teeth  appear,  and  later  decay  and 
drop  out  j  and  so  on  through  the  list  of  invariable  sequences 
that  these  will  suggest— we  say,  for  it  is  really  all  that  we 
can  say,  that  these  sequences  are  invariable  because  they 
belong  to  the  order  or  system  of  Nature ;  or,  in  short,  that 
they  are  "  laws  of  Nature." 

The  dog  and  cow  sometimes  look  wise  enough  to  be 
meditating  on  anything.  If  they  really  could  bother  their 
heads  with  such  matters  or  express  their  ideas  in  speech, 
they  would  probably  say  that  such  sequences  are  invari- 
able, and  then  rest.  But  man  is  impelled  by  his  endow- 
ment of  reason  to  seek  behind  fact  for  cause.  For  that 
something  cannot  come  from  nothing,  that  every  conse- 
quence implies  a  cause,  lies  at  the  very  foundation  of  our 
perception  of  causation.  To  deny  or  ignore  this  would  be 
to  cease  to  reason— which  we  can  no  more  cease  in  some 
sort  of  fashion  to  do  than  we  can  cease  to  breathe. 

Thus,  whether  civilized  or  uncivilized,  man  is  compelled, 
of  mental  necessity,  to  look  for  cause  beneath  the  phe- 
nomena that  he  begins  really  to  consider,  and  no  matter 
what  intermediate  cause  he  may  find,  cannot  be  content 
until  he  reaches  will  and  finds  or  assumes  intent.  This 
necessity  is  universal  to  human  nature,  for  it  belongs  to 
that  quality  or  principle  of  reason  which  essentially  dis- 
tinguishes man  from  the  brute.  The  notion  that— 

The  heathen  in  his  blindness, 
Bows  down  to  wood  and  stone, 

is  of  the  real  ignorance  of  pretended  knowledge.  Beneath 
the  belief  of  the  savage  in  totems  and  amulets  and  charms 
and  witchcraft  lurks  the  recognition  of  spirit;  and  the 
philosophies  that  have  hardened  into  "grotesque  forms  of 
religion  contain  at  bottom  that  idea  of  an  originating  will 


Chap.riL  OF  THE  LAWS  OF  NATURE.  57 

which  the  Hebrew  Scriptures  express  in  their  opening 
sentence :  "  In  the  beginning  God  created  the  heaven  and 
the  earth." 

To  such  recognition  of  will  or  spirit,  reason,  as  it 
searches  from  effect  for  cause,  must  come  before  it  can 
rest  content.  Beyond  this,  reason  cannot  go.  Why  is  it 
that  some  things  always  coexist  with  other  things?  and 
that  some  things  always  follow  other  things?  The  Mo- 
hammedan will  answer :  "  It  is  the  will  of  God."  The  man 
of  our  Western  civilization  will  answer :  "  It  is  a  law  of 
Nature."  The  phrase  is  different,  but  the  answer  one. 


CHAPTER  VIII. 

OF  THE  KNOWLEDGE  PROPERLY  CALLED 
SCIENCE. 

SHOWING  THAT  SCIENCE  DEALS  ONLY  WITH  LAWS  OF  NA- 
TURE, AND  THAT  IN  THE  CURRENT  POLITICAL  ECONOMY 
THIS  HAS  BEEN  FORGOTTEN. 

Proper  meaning  of  science— It  investigates  laws  of  nature,  not 
laws  of  man — Distinction  between  the  two — Their  confusion  in 
the  current  political  economy— Mason  and  Lalor's  "Primer  of 
Political  Economy"  quoted— Absurdity  of  this  confusion— Tur- 
got  on  the  cause  of  such  confusions. 

SCIENCE  is  a  word  much  abused  just  now,  when  all 
sorts  of  pretenders  to  special  knowledge  style  them- 
selves scientists  and  all  sorts  of  ill- verified  speculations  are 
called  sciences ;  yet  it  has  a  well-defined,  proper  meaning 
which  may  easily  be  kept  in  mind.  Literally,  the  word 
science  means  knowledge,  and  when  used  to  distinguish 
a  particular  kind  of  knowledge,  should  have  the  meaning 
of  the  knowledge— that  is,  of  the  highest  and  deepest 
knowledge.  This  is,  indeed,  the  idea  which  attaches  to 
the  word.  In  its  proper  and  definite  meaning,  science 
does  not  include  all  knowledge  or  any  knowledge,  but  that 
knowledge  by  or  in  which  results  or  phenomena  are  related 
to  what  we  assume  to  be  their  cause  or  sufficient  reason, 
and  call  a  law  or  laws  of  nature. 

58 


Chap.  VIII.  KNOWLEDGE  PROPERLY  CALLED  SCIENCE.      59 

As  the  knowledge  we  call  skill  is  that  part  of  knowledge 
which  comes  closest  to  the  individual,  being  retained  in 
the  subconscious  memory,  and  hence  nearly  or  completely 
incommunicable ;  so,  on  the  contrary,  science  properly  so 
called  is  that  part  of  knowledge  which  comes  closer  to  the 
higher  faculty  of  reason,  being  retained  in  the  conscious 
memory,  and  hence  most  easily  and  completely  commu- 
nicable through  the  power  of  speech  in  which  reason  finds 
expression,  and  through  the  arts  that  are  extensions  of  and 
subservient  to  speech,  such  as  writing,  printing  and  the 
like.  Something  of  skill  even  animals  may  acquire. 
Trained  dogs,  trained  goats,  trained  monkeys  and  trained 
bears  are  common,  and  even  what  are  called  trained  fleas 
are  exhibited.  But  it  is  impossible  to  teach  an  animal 
science,  since  animals  lack  the  causal  faculty  by  which 
alone  science  is  apprehended.  It  is  in  youth,  when  the 
joints  are  most  flexible  and  the  muscles  most  supple,  that 
skill  is  most  readily  acquired.  But  it  is  in  the  years  that 
bring  the  contemplative  mind  that  we  most  appreciate  and 
best  acquire  science.  And  so,  while  the  advantages  of 
civilization  do  not  imply  increased  skill,  they  do  imply  the 
extension  of  science. 

With  human  laws  what  is  properly  called  science  has 
nothing  whatever  to  do,  unless  it  be  as  phenomena  which 
it  subjects  to  examination  in  the  effort  to  discover  in 
natural  law  their  cause.  Thus  there  may  be  a  science  of 
jurisprudence,  or  a  science  of  legislation,  as  there  may  be 
a  science  of  grammar,  a  science  of  language,  or  a  science 
of  the  mental  structure  and  its  operations.  But  the  object 
of  such  sciences,  properly  so  called,  is  always  to  discover 
the  laws  of  nature  in  which  human  laws,  customs  and 
modes  of  thought  originate— the  natural  laws  which  lie 
behind  and  permanently  affect,  not  merely  all  external 
manifestations  of  human  will,  but  even  the  internal  affec- 
tions of  that  will  itself. 


60  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

Human  laws  are  made  by  man,  and  share  in  all  his 
weaknesses  and  frailties.  They  must  be  enforced  by 
penalties  subsequent  to  and  conditioned  upon  their  viola- 
tion. Such  penalties  are  called  sanctions.  Unless  ac- 
companied by  some  penalty  for  its  violation,  no  act  of 
legislative  body  or  sovereign  prince  becomes  law.  Lack- 
ing sanction,  it  is  merely  an  expression  of  wish,  not  a 
declaration  of  will.  Human  laws  are  acknowledged  only 
by  man ;  and  that  not  by  all  men  in  all  times  and  places, 
but  only  by  some  men— that  is,  by  men  living  in  the  time 
and  place  where  the  political  power  that  imposes  them  has 
the  ability  to  enforce  their  sanctions  j  and  not  even  by  all 
of  these  men,  but  generally  by  only  a  very  small  part  of 
them.  Limited  to  the  circumscribed  areas  which  we  call 
political  divisions,  they  are  even  there  constantly  fluctuat- 
ing and  changing. 

Natural  laws,  on  the  other  hand,  belong  to  the  natural 
order  of  things ;  to  that  order  in  which  and  by  which  not 
only  man  himself  but  all  that  is,  exists.  They  have  no 
sanctions  in  the  sense  of  penalties  imposed  upon  their 
violation,  and  enforced  subsequent  to  their  violation  j  they 
cannot  be  violated.  Man  can  no  more  resist  or  swerve  a 
natural  law  than  he  can  build  a  world.  They  are  acknow- 
ledged not  only  by  all  men  in  all  times  and  places,  but  also 
by  all  animate  and  all  inanimate  things ;  and  their  sway 
extends  not  merely  over  and  throughout  the  whole  earth 
of  which  we  are  constantly  changing  tenants,  but  over  and 
through  the  whole  system  of  which  it  is  a  part,  and  so  far 
as  either  observation  or  reason  can  give  us  light,  over  and 
through  the  whole  universe,  visible  or  invisible.  So  far 
as  we  can  see,  either  by  observation  or  by  reason,  they 
know  not  change  or  the  shadow  of  turning,  but  are  the 
same— yesterday,  to-day,  to-morrow;  for  they  are  expres- 
sions, not  of  the  mutable  will  of  man,  but  of  the  immutable 
will  of  God. 


Chap.  nil.  KNOWLEDGE  PROPERLY  CALLED  SCIENCE.      61 

I  dwell  again  on  the  distinction  between  laws  of  nature 
and  laws  of  man,  because  it  is  of  the  first  necessity  in  be- 
ginning the  study  of  political  economy  that  we  should 
grasp  it  firmly  and  keep  it  clearly  in  mind.  This  necessity 
is  the  greater,  since  we  shall  find  that  in  the  accredited 
economic  treatises  laws  of  nature  and  laws  of  man  are 
confused  together  in  what  they  call  laws  of  political 
economy. 

It  is  not  worth  while  to  make  many  quotations  to  show 
a  confusion  which  one  may  see  by  taking  up  the  economic 
work  approved  by  college  or  university  that  first  comes  to 
his  hand  5  but  that  what  passes  in  these  institutions  for 
the  science  of  political  economy  may  speak  for  itself,  I 
shall  make  one  quotation. 

I  take  for  that  purpose  the  best  book  I  can  find  that  puts 
into  compact  form  the  teachings  of  the  scholastic  econo- 
mists—one that  is,  I  think,  superior  in  this  to  Mrs.  Millicent 
Garrett  Fawcett's  "Political  Economy  for  Beginners/' 
which  at  the  time  I  wrote  "  Progress  and  Poverty  n  seemed 
to  me  the  best  short  statement  of  accepted  economic  teach- 
ings I  then  knew  of.  It  is  "  The  Primer  of  Political  Econ- 
omy, in  Sixteen  Definitions  and  Forty  Propositions,"  by 
Alfred  B.  Mason  and  John  J.  Lalor  (Chicago,  A.  C.  McClurg 
&  Co.).*  Messrs.  Mason  and  Lalor,  who  have  since  proved 
themselves  to  be  men  of  ability,  were  in  1875,  when  they 
wrote  the  primer,  fresh  from  a  university  course  of  political 
economy  and  a  subsequent  study  of  the  approved  authori- 
ties, and  their  primer  has  been  widely  indorsed  and  largely 
used  in  institutions  of  learning.  This  is  the  first  of  their 
sixteen  definitions,  and  their  explanation  of  it : 


*  In  writing  this  book  I  have  vainly  tried  to  find  some  such  con- 
densation that  would  do  for  the  "new-school"  scholastic  economy 
what  Mrs.  Fawcett  and  Messrs.  Mason  and  Lalor  have  done  for  the 
old,  and  can  only  conclude  that  its  teachings  are  too  vague  to  permit 
of  such  condensation. 


OF  THE 

"UNIVERSITY 


62  THE  MEANING  OF   POLITICAL  ECONOMY.     Book  I. 

DEFINITION  I.— Political  Economy  is  the  Science  which  teaches 
the  laws  that  regulate  the  Production,  Distribution  and  Exchange 
of  Wealth. 

Everything  in  this  world  is  governed  by  law.  Human  laws  are 
those  made  by  man.  All  others  are  natural  laws.  A  law  providing 
for  the  education  of  children  in  schools  is  a  human  law.  The  law 
that  children  shall  keep  growing,  if  they  live,  until  they  are  men  and 
women,  and  shall  then  slowly  decay  and  at  last  die,  is  a  natural  law. 
An  apple  falls  from  a  tree  and  the  earth  moves  around  the  sun  in 
obedience  to  natural  laws.  The  laws  which  regulate  the  production, 
distribution  and  exchange  of  wealth  are  of  both  kinds.  The  more 
important  ones,  however,  are  natural. 

In  this  Messrs.  Mason  and  Lalor  aptly  illustrate  the 
essential  difference  between  natural  law  and  human  law. 
But  the  way  in  which  the  two  are  mixed  together  as  eco- 
nomic laws  suggests  the  examination-paper  of  a  Philadel- 
phia boy  more  interested  in  hooking  catfish  and  stoning 
frogs  than  in  Lindley  Murray.  To  the  question,  "  Name 
and  describe  nouns  ?  n  the  answer  was : 

Nouns  are  three  in  number  and  sometimes  more.  There  are 
proper  nouns,  common  nouns,  bloody  nouns  *  and  other  nouns. 
Proper  nouns  are  the  properest  nouns,  but  common  nouns  are  the 
commonest.  Bloody  nouns  are  the  big  ones.  Other  nouns  are  no 
good. 

Yet  ridiculous  as  is  this  confusion  of  human  law  and 
natural  law,  and  absurd  as  is  a  definition  that  leaves  one 
to  guess  which  is  meant  by  "  laws,"  this  little  primer  cor- 
rectly gives  what  is  to  be  found  in  the  pretentious  treatises 
it  endeavors  to  condense— and  that  even  in  the  most 
systematic  and  careful  of  them,  as  I  shall  hereafter  have 
occasion  to  show. 

It  is  only  with  the  implication  that  by  law  is  meant 
natural  law,  that  we  can  say,  "Everything  in  this  world  is 


*  A  name  given  by  boys  in  Philadelphia  to  large  bullfrogs. 


Chap.  VIII.  KNOWLEDGE  PROPERLY  CALLED  SCIENCE.     63 

governed  by  law."  To  say,  as  the  little  summary  of  the 
scholastic  political  economy  from  which  I  have  quoted 
says,  that  political  economy  is  the  science  which  teaches 
the  laws,  some  of  them  natural  laws  and  some  of  them 
human  laws,  which  regulate  the  production,  distribution 
and  exchange  of  wealth,  is  like  saying  that  astronomy  is 
the  science  which  teaches  the  laws,  some  of  them  laws  of 
matter  and  motion  and  some  of  them  Bulls  of  Popes  and 
Acts  of  Parliament,  which  regulate  the  movements  of  stars 
and  comets. 

The  absurdity  of  this  is  not  so  strikingly  obvious  in  the 
ponderous  treatises  from  which  it  is  derived  as  in  this  little 
primer,  because  the  attention  of  the  reader  is  in  them  con- 
fused by  the  utter  want  of  logical  arrangement,  and  dis- 
tracted by  the  shoveling  in  on  him.  as  it  were,  of  great 
masses  of  irrelevant  matter,  which  makes  it  a  most  difficult, 
and  with  the  majority  of  readers  an  utterly  hopeless  task 
to  dig  out  what  is  really  meant— a  task  usually  abandoned 
by  the  ordinary  reader  with  a  secret  feeling  of  shame  at 
his  own  incapacity  to  follow  such  deep  and  learned  men, 
who  seem  lightly  to  revel  in  what  he  cannot  understand. 
The  expositions  of  what  passes  for  the  science  of  political 
economy  in  our  schools  do  indeed  for  the  most  part  con- 
tain some  things  that  really  belong  to  science.  But  in  far 
larger  part  what  properly  belongs  to  science  is,  in  the 
literature  of  political  economy  that  has  grown  up  since 
his  time,  confused  and  overlaid  with  what  Turgot,  over  a 
hundred  years  ago,  spoke  of  as  an  art— the  art,  namely, 
"  of  those  who  set  themselves  to  darken  things  that  are 
clear  to  the  open  mind." 

What  this  truly  great  Frenchman  of  the  eighteenth  cen- 
tury said  is  worth  quoting,  for  it  finds  abundant  and  con- 
stant illustration  in  the  writings  of  the  professors  of 
political  economy  of  the  nineteenth  century,  and  especially 
in  the  latest  of  them : 


64  THE   MEANING  OF  POLITICAL  ECONOMY.     Boole  I. 

This  art  consists  in  never  beginning  at  the  beginning,  but  in  rush- 
ing into  the  subject  in  all  its  complications,  or  with  some  fact  that 
is  only  an  exception,  or  some  circumstance,  isolated,  far-fetched  or 
merely  collateral,  which  does  not  belong  to  the  essence  of  the  ques- 
tion and  goes  for  nothing  in  its  solution.  .  .  .  Like  a  geometer  who 
treating  of  triangles  should  begin  with  white  triangles  as  most  sim- 
ple, in  order  to  treat  afterwards  of  blue  triangles,  then  of  red  trian- 
gles, and  so  on. 

If  political  economy  is  a  science— and  if  not  it  is  hardly 
worth  the  while  of  earnest  men  to  bother  themselves  with 
it— it  must  follow  the  rules  of  science,  and  seek  in  natural 
law  the  causes  of  the  phenomena  which  it  investigates. 
With  human  law,  except  as  furnishing  illustrations  and 
supplying  subjects  for  its  investigation,  it  has,  as  I  have 
already  said,  nothing  whatever  to  do.  It  is  concerned 
with  the  permanent,  not  with  the  transient  5  with  the  laws 
of  nature,  not  with  the  laws  of  man. 


CHAPTER  IX. 
THE  ECONOMY  CALLED  POLITICAL  ECONOMY. 

SHOWING    THE    MEANING,   UNITS   AND    SCOPE    OF   POLITICAL 
ECONOMY. 

The  word  economy— The  word  political— Origin  of  the  term  "political 
economy"  and  its  confusions — It  is  not  concerned  with  the  body 
politic,  but  with  the  body  economic — Its  units,  and  the  system  or 
arrangement  of  which  it  treats— Its  scope. 

THE  word  economy,  drawn  from  two  Greek  words, 
house  and  law,  which  together  signify  the  manage- 
ment or  arrangement  of  the  material  part  of  household 
or  domestic  affairs,  means  in  its  most  common  sense  the 
avoidance  of  waste.  We  economize  money  or  time  or 
strength  or  material  when  we  so  arrange  as  to  accomplish 
a  result  with  the  smallest  expenditure.  In  a  wider  sense 
its  meaning  is  that  of  a  system  or  arrangement  or  adapta- 
tion of  means  to  ends  or  of  parts  to  a  whole.  Thus,  we 
speak  of  the  economy  of  the  heavens ;  of  the  economy  of 
the  solar  system ;  the  economy  of  the  vegetable  or  animal 
kingdoms  j  the  economy  of  the  human  body ;  or,  in  short, 
of  the  economy  of  anything  which  involves  or  suggests  the 
adaptation  of  means  to  ends,  the  coordination  of  parts  in 
a  whole. 

As  there  is  an  economy  of  individual  affairs,  an  economy 
of  the  household,  an  economy  of  the  farm  or  workshop 
or  railway,  each  concerned  with  the  adaptation  in  these 

65 


66  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  L 

spheres  of  means  to  ends,  by  which  waste  is  avoided  and 
the  largest  results  obtained  with  the  least  expenditure,  so 
there  is  an  economy  of  communities,  of  the  societies  in 
which  civilized  men  live— an  economy  which  has  special 
relation  to  the  adaptation  or  system  by  which  material 
wants  are  satisfied,  or  to  the  production  and  distribution 
of  wealth. 

The  word  political  means,  relating  to  the  body  of  citi- 
zens or  state,  the  body  politic ;  to  things  coming  within  the 
scope  and  action  of  the  commonwealth  or  government ;  to 
public  policy. 

Political  economy,  therefore,  is  a  particular  kind  of 
economy.  In  the  literal  meaning  of  the  words  it  is  that 
kind  of  economy  which  has  relation  to  the  communit}^  or 
state ;  to  the  social  whole  rather  than  to  individuals. 

But  the  convenience  which  impels  us  to  abbreviate  a 
long  term  has  led  to  the  frequent  use  of  "  economic  "  when 
"politico-economic"  is  meant,  so  that  we  may  by  usage 
speak  of  the  literature  or  principles  or  terms  of  political 
economy  as  "economic  literature,"  or  "economic  princi- 
ples," or  "  economic  terms."  Some  recent  writers,  indeed, 
seem  to  have  substituted  the  term  "  economics  "  for  politi- 
cal economy  itself.  But  this  is  a  matter  as  to  which  the 
reader  should  be  on  his  guard,  for  it  has  been  used  to  make 
what  is  not  really  political  economy  pass  for  political  econ- 
omy, as  I  shall  hereafter  show. 

Adam  Smith,  who  at  the  close  of  the  last  century  gave 
so  powerful  an  impulse  to  the  study  of  what  has  since  been 
called  political  economy  that  he  is,  not  without  justice, 
spoken  of  as  its  father,  entitled  his  great  book,  "An 
Inquiry  into  the  Nature  and  Causes  of  the  Wealth  of 
Nations ;"  and  what  we  call  political  economy  the  Germans 
call  national  economy. 

No  term  is  of  importance  if  we  rightly  understand  what 
it  means.  But,  both  in  the  term  "  political  economy,"  and 


Chap.  IX.    ECONOMY  CALLED  POLITICAL  ECONOMY.          67 

in  that  of  "  national  economy,"  as  well  as  in  the  phrase 
"  wealth  of  nations/'  lurk  suggestions  which  may  and  in 
fact  often  do  interfere  with  a  clear  apprehension  of  the 
ground  they  properly  cover. 

The  use  of  the  term  "  political  economy  "  began  at  a  time 
when  the  distinction  between  natural  law  and  human  law 
was  not  clearly  made,  when  what  I  have  called  the  body 
economic  was  largely  confounded  with  what  is  properly 
the  body  politic,  and  when  it  was  the  common  opinion  in 
Europe,  even  of  thoughtful  men,  that  the  production  and 
distribution  of  wealth  were  to  be  regulated  by  the  legisla- 
tive action  of  the  sovereign  or  state. 

The  first  one  to  use  the  term  is  said  to  have  been 
Antoine  de  Montchretien  in  his  "Treatise  on  Political 
Economy  "  ("  Traite  de  Peconomie  politique  "),  published  in 
Rouen,  France,  1615.  But  if  not  invented  by  them,  it  was 
given  currency,  some  130  or  140  years  after,  by  those 
French  exponents  of  natural  right,  or  the  natural  order, 
who  may  to-day  be  best  described  as  the  first  single-tax 
men.  They  used  the  term  "political  economy"  to  distin- 
guish from  politics  the  branch  of  knowledge  with  which 
they  were  concerned,  and  from  this  called  themselves 
Economists.  The  term  is  used  by  Adam  Smith  only  in 
speaking  of  "  this  sect,"  composed  of  "  a  few  men  of  great 
learning  and  ingenuity  in  France."  But  although  these 
Economists  were  overwhelmed  and  have  been  almost  for- 
gotten, yet  of  their  "noble  and  generous  system"  this 
term  remained,  and  since  the  time  of  Adam  Smith  it  has 
come  into  general  use  as  expressive  of —to  accept  the  most 
common  and  I  think  sufficient  definition— that  branch  of 
knowledge  that  treats  of  the  nature  of  wealth,  and  the  laws 
of  its  production  and  distribution. 

But  the  confusion  with  politics,  which  the  Frenchmen 
of  whom  Adam  Smith  speaks  endeavored  to  clear  away 
by  their  adoption  of  the  term  "political  economy,"  still  con- 


68  THE  MEANING  OF   POLITICAL  ECONOMY.     Book  I. 

tinues,  and  is  in  fact  suggested  by  the  term  itself,  which 
seems  at  first  apt  to  convey  the  impression  of  a  particular 
kind  of  politics  rather  than  of  a  particular  kind  of  econ- 
omy. The  word  political  has  a  meaning  which  relates  it 
to  civil  government,  to  the  exercise  of  human  sovereignty 
by  enactment  or  administration,  without  reference  to  those 
invariable  sequences  which  we  call  natural  laws.  An  area 
differentiated  from  other  areas  with  reference  to  this 
power  of  making  municipal  enactments  and  compelling 
obedience  to  them,  we  style  a  political  division ;  and  the 
larger  political  divisions,  in  which  the  highest  sovereignty 
is  acknowledged,  we  call  nations.  It  is  therefore  impor- 
tant to  keep  in  mind  that  the  laws  with  which  political 
economy  primarily  deals  are  not  human  enactments  or 
municipal  laws,  but  natural  laws;  and  that  they  have 
no  more  reference  to  political  divisions  than  have  the 
laws  of  mechanics,  the  laws  of  optics  or  the  laws  of  gravi- 
tation. 

It  is  not  with  the  body  politic,  but  with  that  body  social 
or  body  industrial  that  I  have  called  the  body  economic, 
that  political  economy  is  directly  concerned  j  not  with  the 
commonwealth  of  which  a  man  becomes  a  member  by  the 
attribution  or  acceptance  of  allegiance  to  prince,  potentate 
or  republic  j  but  with  the  commonwealth  of  which  he  be- 
comes a  member  by  the  fact  that  he  lives  in  a  state  of 
society  in  which  each  does  not  attempt  to  satisfy  all  of  his 
own  material  wants  by  his  own  direct  efforts,  but  obtains 
the  satisfaction  of  some  of  them  at  least  through  the 
cooperation  of  others.  The  fact  of  participation  in  this 
cooperation  does  not  make  him  a  citizen  of  any  particular 
state.  It  makes  him  a  civilized  man,  a  member  of  the 
civilized  world— a  unit  in  that  body  economic  to  which 
our  political  distinctions  of  states  and  nations  have  no 
more  relation  than  distinctions  of  color  have  to  distinctions 
of  form. 


Chap.  IX.    ECONOMY  CALLED  POLITICAL  ECONOMY.          69 

The  unit  of  human  life  is  the  individual.  From  our  first 
consciousness,  or  at  least  from  our  first  memory,  our 
deepest  feeling  is,  that  what  we  recognize  as  "  I "  is  some- 
thing distinct  from  all  other  things,  and  the  actual  merge- 
ment  of  its  individuality  in  other  individualities,  however 
near  and  dear,  is  something  we  cannot  conceive  of.  But 
the  lowest  unit  of  which  political  economy  treats  often 
includes  the  family  with  the  individual.  For  though 
isolated  individuals  may  exist  for  a  while,  it  is  only  under 
unnatural  conditions.  Human  life,  as  we  know  it,  begins 
with  the  conjuncture  of  individuals,  and  even  for  some 
time  after  birth  can  continue  to  exist  only  under  conditions 
which  make  the  new  individual  dependent  on  and  subject 
to  preceding  individuality  j  while  it  requires  for  its  fullest 
development  and  highest  satisfactions  the  union  of  indi- 
viduals in  one  economic  unit. 

While,  then,  in  treating  of  the  subject-matter  of  political 
economy,  it  will  be  convenient  to  speak  of  the  units  we 
shall  have  occasion  to  refer  to  as  individuals,  it  should  be 
understood  that  this  term  does  not  necessarily  mean  sepa- 
rate persons,  but  includes,  as  one,  those  so  bound  together 
by  the  needs  of  family  life  as  to  have,  as  our  phrase  is, 
"  one  purse." 

An  economy  of  the  economic  unit  would  not  be  a  polit- 
ical economy,  and  the  laws  of  which  it  would  treat  would 
not  be  those  with  which  political  economy  is  concerned. 
They  would  be  the  laws  of  personal  or  family  conduct. 
An  economy  of  the  individual  or  family  could  treat  the 
production  of  wealth  no  further  than  related  to  the  pro- 
duction of  such  a  unit.  And  though  it  might  take  cog- 
nizance of  the  physical  laws  involved  in  its  agriculture  and 
mechanics,  of  the  distribution  of  wealth  in  the  economic 
sense  it  could  not  treat  at  all,  since  any  apportionment 
among  the  members  of  such  a  family  of  wealth  obtained 
by  it  would  be  governed  by  the  laws  of  individual  or  family 


70  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

life,  and  not  by  any  law  of  the  distribution  of  the  results 
of  socially  conjoined  effort. 

But  when  in  the  natural  course  of  human  growth  and 
development  economic  units  come  into  such  relations  that 
the  satisfaction  of  material  desires  is  sought  by  conjoined 
effort,  the  laws  which  political  economy  seeks  to  discover 
begin  to  appear. 

The  system  or  arrangement  by  which  in  such  conditions 
material  satisfactions  are  sought  and  obtained  may  be 
roughly  likened  to  a  machine  fed  by  combined  effort,  and 
producing  joint  results,  which  are  finally  divided  or  dis- 
tributed in  individual  satisfactions— a  machine  resem- 
bling an  old-time  grist-mill  to  which  individuals  brought 
separate  parcels  of  grain,  receiving  therefrom  in  meal,  not 
the  identical  grain  each  had  put  in,  nor  yet  its  exact  equiva- 
lent, but  an  equivalent  less  a  charge  for  milling. 

Or  to  make  a  closer  illustration  :  The  system  or  arrange- 
ment which  it  is  the  proper  purpose  of  political  economy 
to  discover  may  be  likened  to  that  system  or  arrangement 
by  which  the  physical  body  is  nourished.  The  lowest  unit 
of  animal  life,  so  far  as  we  can  see,  is  the  single  cell,  which 
sucks  in  and  assimilates  its  own  food  j  thus  directly  satis- 
fying what  we  may  style  its  own  desires.  But  in  those 
highest  forms  of  animal  life  of  which  man  is  a  type,  myr- 
iads of  cells  have  become  conjoined  in  related  parts  and 
organs,  exercising  different  and  complex  functions,  which 
result  in  the  procurement,  digestion  and  assimilation  of 
the  food  that  nourishing  each  separate  cell  maintains  the 
entire  organism.  Brain  and  stomach,  hands  and  feet, 
eyes  and  ears,  teeth  and  hair,  bones,  nerves,  arteries  and 
veins,  still  less  the  cells  of  which  all  these  parts  are  com- 
posed, do  not  feed  themselves.  Under  the  government  of 
the  brain,  what  the  hands,  aided  by  the  legs,  assisted  by 
the  organs  of  sense,  procure,  is  carried  to  the  mouth,  mas- 
ticated by  the  teeth,  taken  by  the  throat  to  the  alembic  of 


Chap.  IX.    ECONOMY  CALLED  POLITICAL  ECONOMY.          71 

the  stomach,  where  aided  by  the  intestines  it  is  digested, 
and  passing  into  a  fluid  containing  all  nutritive  substances, 
is  oxygenized  by  the  lungs  ;  and  impelled  by  the  pumping 
of  the  heart,  makes  a  complete  circuit  of  the  body  through 
a  system  of  arteries  and  veins,  in  the  course  of  which 
every  part  and  every  cell  takes  the  nutriment  it  requires. 

Now,  what  the  blood  is  to  the  physical  body,  wealth,  as 
we  shall  hereafter  see  more  fully,  is  to  the  body  economic. 
And  as  we  should  find,  were  we  to  undertake  it,  that  a 
description  of  the  manner  in  which  blood  is  produced  and 
distributed  in  the  physical  body  would  involve  almost,  if 
not  quite,  a  description  of  the  entire  physical  man  with  all 
his  powers  and  functions  and  the  laws  which  govern  their 
operations ;  so  we  shall  find  that  what  is  included  or  in- 
volved in  political  economy,  the  science  which  treats  of 
the  production  and  distribution  of  wealth,  is  almost,  if 
not  quite,  the  whole  body  social,  with  all  its  parts,  powers 
and  functions,  and  the  laws  under  which  they  operate. 

The  scope  of  political  economy  would  be  roughly  ex- 
plained were  we  to  style  it  the  science  which  teaches  how 
civilized  men  get  a  living.  Why  this  idea  is  sufficiently 
expressed  as  the  production  and  distribution  of  wealth  will 
be  more  fully  seen  hereafter ;  but  there  is  a  distinction  as 
to  what  is  called  getting  a  living  that  it  may  be  worth 
while  here  to  note. 

We  have  but  to  look  at  existing  facts  to  see  that  there 
are  two  ways  in  which  men  (i.e.,  some  men)  may  obtain 
satisfaction  of  their  material  desires  for  things  not  freely 
supplied  to  them  by  nature. 

The  first  of  these  ways  is,  by  working,  or  rendering 
service. 

The  second  is,  by  stealing,  or  extorting  service. 

But  there  is  only  one  way  in  which  man  (i.e.,  men  in 
general  or  all  men)  can  satisfy  his  material  desires— that 
is  by  working,  or  rendering  service. 


72  THE  MEANING  OF  POLITICAL  ECONOMY.     Boole  I. 

For  it  is  manifestly  impossible  that  men  in  general  or 
all  men,  or  indeed  any  but  a  small  minority  of  men,  can 
satisfy  their  material  desires  by  stealing,  since  in  the 
nature  of  things  working  or  the  rendering  of  service  is  the 
only  way  in  which  the  material  satisfactions  of  desire  can 
be  primarily  obtained  or  produced. 

Stealing  produces  nothing  ;  it  only  alters  the  distribution 
of  what  has  already  been  produced. 

Therefore,  however  it  be  that  stealing  is  to  be  considered 
by  an  individual  economy  or  by  an  economy  of  a  political 
division,  and  with  whatever  propriety  a  successful  thief 
who  has  endowed  churches  and  colleges  and  libraries  and 
soup-houses  may  in  such  an  economy  be  treated  as  a  public 
benefactor  and  spoken  of  as  Antony  spoke  of  Caesar- 
He  hath  brought  many  captives  home  to  Rome, 
Whose  ransoms  did  the  general  coffers  fill, 

—a  true  science  of  political  economy  takes  no  cognizance 
of  stealing,  except  in  so  far  as  the  various  forms  of  it  may 
pervert  the  natural  distribution,  and  thus  check  the  nat- 
ural production  of  wealth. 

Yet,  at  the  same  time,  political  economy  does  not  con- 
cern itself  with  the  character  of  the  desires  for  which  sat- 
isfaction is  sought.  It  has  nothing  to  do,  either  with  the 
originating  motive  that  prompts  to  action  in  the  satisfac- 
tion of  material  desires,  nor  yet  with  the  final  satisfaction 
which  is  the  end  and  aim  of  that  action.  It  is,  so  to  speak, 
like  the  science  of  navigation,  which  is  concerned  with  the 
means  whereby  a  ship  may  be  carried  from  point  to  point 
on  the  ocean,  but  asks  not  whether  that  ship  may  be  a 
pirate  or  a  missionary  barque,  what  are  the  expectations 
which  may  induce  its  passengers  to  go  from  one  place  to 
another,  or  whether  or  not  these  expectations  will  be  grati- 
fied on  their  arrival.  Political  economy  is  not  moral  or 


Chap.  IX.    ECONOMY  CALLED  POLITICAL  ECONOMY.          73 

ethical  science,  nor  yet  is  it  political  science.  It  is  the 
science  of  the  maintenance  and  nutriment  of  the  body 
politic. 

Although  it  will  be  found  incidentally  to  throw  a  most 
powerful  light  upon,  and  to  give  a  most  powerful  support 
to,  the  teachings  of  moral  or  ethical  science,  its  proper 
business  is  neither  to  explain  the  difference  between  right 
and  wrong  nor  to  persuade  to  one  in  preference  to  the 
other.  And  while  it  is  in  the  same  way  what  may  be 
termed  the  bread-and-butter  side  of  politics,  it  is  directly 
concerned  only  with  the  natural  laws  which  govern  the 
production  and  distribution  of  wealth  in  the  social  organ- 
ism, and  not  with  the  enactments  of  the  body  politic  or 
state. 


CHAPTER  X. 
THE  ELEMENTS  OF  POLITICAL  ECONOMY. 

SHOWING  HOW  POLITICAL  ECONOMY  SHOULD  PROCEED   AND 
WHAT  RELATIONS  IT  SEEKS  TO  DISCOVER. 

How  to  understand  a  complex  system— It  is  the  purpose  of  such  a 
system  that  political  economy  seeks  to  discover — These  laws,  nat- 
ural laws  of  human  nature— The  two  elements  recognized  by  po- 
litical economy— These  distinguished  only  by  reason— Human 
will  affects  the  material  world  only  through  laws  of  nature — It  is 
the  active  factor  in  all  with  which  political  economy  deals. 

TO  understand  a  complex  machine  the  best  way  is  first 
to  see  what  is  the  beginning  and  what  the  end  of  its 
movements,  leaving  details  until  we  have  mastered  its  gen- 
eral idea  and  comprehended  its  purpose.  In  this  way  we 
most  easily  see  the  relation  of  parts  to  each  other  and  to  the 
object  of  the  whole,  and  readily  come  to  understand  to  the 
minutest  movements  and  appliances  what  without  the  clue 
of  intention  might  have  hopelessly  perplexed  us. 

When  the  safety  bicycle  was  yet  a  curiosity  even  in  the 
towns  of  England  and  the  United  States,  an  American 
missionary  in  a  far-off  station  received  from  an  old  friend, 
unaccompanied  by  the  letter  intended  to  go  with  it,  a 
present  of  one  of  these  machines,  which  for  economy  in 
transportation  had  not  been  set  up,  but  was  forwarded  in 
its  unassembled  parts.  How  these  parts  were  to  be  put 
together  was  a  perplexing  problem,  for  neither  the  mission- 

74 


Chap.  X.     THE  ELEMENTS   OF   POLITICAL  ECONOMY.       75 

ary  himself  nor  any  one  lie  could  consult  could  at  first 
imagine  what  the  thing  was  intended  to  do,  and  their 
guesses  were  of  almost  everything  but  the  truth,  until  at 
length  the  saddle  suggested  a  theory,  which  was  so  suc- 
cessfully followed  that  by  the  time,  months  afterwards, 
another  ship  brought  the  missing  letter,  the  mission- 
ary was  riding  over  the  hard  sand  of  the  beach  on  his 
wheel. 

In  the  same  way  an  intelligent  savage,  placed  in  a  great 
industrial  hive  of  our  civilization  before  some  enormous 
factory  throbbing  and  whirring  with  the  seemingly  inde- 
pendent motion  of  pistons  and  wheels  and  belts  and  looms, 
might,  with  no  guide  but  his  own  observation  and  reason, 
soon  come  to  see  the  what,  the  how  and  the  why  of  the 
whole  as  a  connected  device  for  using  the  power  obtained 
by  the  transformation  of  coal  into  heat  in  the  changing  of 
such  things  as  wool,  silk  or  cotton  into  blankets  or  piece- 
goods,  stockings  or  ribbons. 

Now  the  reason  which  enables  us  to  understand  the 
works  of  man  as  soon  as  we  discover  the  reason  that  has 
brought  them  into  existence,  also  enables  us  to  interpret 
nature  by  assuming  a  like  reason  in  nature.  The  child's 
question,  "  What  is  it  for  ?  "—what  is  its  purpose  or  intent  ? 
—is  the  master  key  that  enables  us  to  turn  the  locks  that 
hide  nature's  mysteries.  It  is  in  this  way  that  all  dis- 
coveries in  the  field  of  the  natural  sciences  have  been 
made,  and  this  will  be  our  best  way  in  the  investigation 
we  are  now  entering  upon.  The  complex  phenomena  of 
the  production  and  distribution  of  wealth  in  the  elaborate 
organization  of  modern  civilization  will  only  puzzle  us,  as 
the  many  confused  and  confusing  books  written  to  explain 
it  show,  if  we  begin,  as  it  were,  from  the  middle.  But  if 
we  seek  first  principles  and  trace  out  main  lines,  so  as  to 
comprehend  the  skeleton  of  their  relation,  they  will  readily 
become  intelligible. 


76  THE  MEANING  OF  POLITICAL  ECONOMY.     Bool  1. 

The  immense  aggregate  of  movements  by  which,  in 
civilization,  wealth  is  produced  and  distributed,  viewed 
collectively  as  the  subject  of  political  economy,  constitute 
a  system  or  arrangement  much  greater  than,  yet  analogous 
to,  the  system  or  arrangement  of  a  great  factory.  In  the 
attempt  to  understand  the  laws  of  nature,  which  they  illus- 
trate and  obey,  let  us  avoid  the  confusion  that  inevitably 
attends  beginning  from  the  middle,  by  proceeding  in  the 
way  suggested  in  our  illustration— the  only  scientific  way. 

These  movements,  so  various  in  their  modes,  and  so 
complex  in  their  relations,  with  which  political  economy 
is  concerned,  evidently  originate  in  the  exertion  of  human 
will,  prompted  by  desire ;  their  means  are  the  material  and 
forces  that  nature  offers  to  man  and  the  natural  laws  which 
these  obey;  their  end  and  aim  the  satisfaction  of  man's 
material  desires.  If  we  try  to  call  to  mind  as  many  as  we 
can  of  the  different  movements  that  are  included  in  the 
production  and  distribution  of  wealth  in  modern  civiliza- 
tion—the catching  and  gathering,  the  separating  and 
combining,  the  digging  and  planting,  the  baking  and 
brewing,  the  weaving  and  dyeing,  the  sewing  and  washing, 
the  sawing  and  planing,  the  melting  and  forging,  the 
moving  and  transporting,  the  buying  and  selling— we 
shall  see  that  what  they  all  aim  to  accomplish  is  some  sort 
of  change  in  the  place,  form  or  relation  of  the  materials 
or  forces  supplied  by  nature  so  as  better  to  satisfy  human 
desire. 

Thus  the  movements  with  which  political  economy  is 
concerned  are  human  actions,  having  for  their  aim  the 
attainment  of  material  satisfactions.  And  the  laws  that  it 
is  its  province  to  discover  are  not  the  laws  manifested  in 
the  existence  of  the  materials  and  forces  of  nature  that 
man  thus  utilizes,  nor  yet  the  laws  which  make  possible 
their  change  in  place,  form  or  relation,  but  the  laws  of 
man's  own  nature,  which  affect  his  own  actions  in  the 


Chap.  X.     THE  ELEMENTS  OF   POLITICAL  ECONOMY.       77 

endeavor  to  satisfy  his  desires  by  bringing  about  such 
changes. 

The  world,  as  it  is  apprehended  by  human  reason,  is  by 
that  reason  resolvable,  as  we  have  seen,  into  three  elements 
or  factors— spirit,  matter  and  energy.  But  as  these  three 
ultimate  elements  are  conjoined  both  in  what  we  call  man 
and  in  what  we  call  nature,  the  world  regarded  from  the 
standpoint  of  political  economy  has  'for  its  original  ele- 
ments, man  and  nature.  Of  these,  the  human  element  is 
the  initiative  or  active  factor— that  which  begins  or  acts 
first.  The  natural  element  is  the  passive  factor— that 
which  receives  action  and  responds  to  it.  From  the 
interaction  of  these  two  proceed  all  with  which  political 
economy  is  concerned — that  is  to  say,  all  the  changes  that 
by  man's  agency  may  be  wrought  in  the  place,  form  or 
condition  of  material  things  so  as  better  to  fit  them  for 
the  satisfaction  of  his  desires. 

Between  the  material  things  which  come  into  existence 
through  man's  agency  and  those  which  come  into  existence 
through  the  agency  of  nature  alone,  the  difference  is  as 
clear  to  human  reason  as  the  difference  between  a  moun- 
tain and  a  pyramid,  between  what  was  on  the  shores  of 
Lake  Michigan  when  the  caravels  of  Columbus  first  plowed 
the  waters  of  the  Caribbean  Sea  and  the  wondrous  White 
City,  beside  which  in  1893  the  antitypes  of  those  caravels, 
by  gift  of  Spain,  were  moored.  Yet  it  eludes  our  senses 
and  can  be  apprehended  only  by  reason. 

Any  one  can  distinguish  at  a  glance,  it  may  be  said, 
between  a  pyramid  and  a  mountain,  or  a  city  and  a  forest. 
But  not  by  the  senses  uninterpreted  by  reason.  The  ani- 
mals, whose  senses  are  even  keener  than  ours,  seem  inca- 
pable of  making  the  distinction.  In  the  actions  of  the  most 
intelligent  dog  you  will  find  no  evidence  that  he  recognizes 
any  difference  between  a  statue  and  a  stone,  a  tobacconist's 
wooden  Indian  and  the  stump  of  a  tree.  And  things  are 


78  THE   MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

now  manufactured  and  sold  as  to  which  it  requires  an 
expert  to  tell  whether  they  are  products  of  man  or  products 
of  nature. 

For  the  essential  thing  that  in  the  last  analysis  distin- 
guishes man  from  nature  can,  on  the  material  plane  that 
is  cognizable  by  the  senses,  appear  only  in  the  garb  and 
form  of  the  material.  Whatever  man  makes  must  have 
for  its  substance  preexisting  matter ;  whatever  motion  he 
exerts  must  be  drawn  from  a  preexisting  stock  of  energy. 
Take  away  from  man  all  that  is  contributed  by  external 
nature,  all  that  belongs  to  the  economic  factor  land,  and 
you  have,  what?  Something  that  is  not  tangible  by  the 
senses,  yet  which  is  the  ultimate  recipient  and  final  cause 
of  sensation ;  something  which  has  no  form  or  substance 
or  direct  power  in  or  over  the  material  world,  but  which 
is  yet  the  originating  impulse  which  utilizes  motion  to 
mold  matter  into  forms  it  desires,  and  to  which  we  must 
look  for  the  origin  of  the  pyramid,  the  caravel,  the  indus- 
trial palaces  of  Chicago  and  the  myriad  marvels  they  con- 
tained. 

I  do  not  wish  to  raise,  or  even  to  refer  further  than  is 
necessary,  to  those  deep  problems  of  being  and  genesis 
where  the  light  of  reason  seems  to  fail  us  and  twilight 
deepens  into  dark.  But  we  must  grasp  the  thread  at  its 
beginning,  if  we  are  to  hope  to  work  our  way  through  a 
tangled  skein.  And  into  what  fa,tal  confusions  those  fall 
who  do  not  begin  at  the  beginning  may  be  seen  in  current 
economic  works,  which  treat  capital  as  though  it  were  the 
originator  in  production,  labor  as  though  it  were  a  product, 
and  land  as  though  it  were  a  mere  agricultural  instrument 
—a  something  on  which  cattle  are  fed  and  wheat  and 
cabbages  raised. 

We  cannot  really  consider  the  beginning  of  things,  so 
far  as  a  true  political  economy  is  forced  to  concern  itself 
with  them,  without  seeing  that  when  man  came  into  the 


Cltap.  X.     THE  ELEMENTS  OF  POLITICAL  ECONOMY.       79 

world  the  sum  of  energy  was  not  increased  nor  that  of 
matter  added  to  ;  and  that  so  it  must  be  to-day.  In  all  the 
changes  that  man  brings  about  in  the  material  world,  he 
adds  nothing  to  and  subtracts  nothing  from  the  sum  of 
matter  and  energy.  He  merely  brings  about  changes  in 
the  place  and  relation  of  what  already  exists,  and  the  first 
and  always  indispensable  condition  to  his  doing  anything 
in  the  material  world,  and  indeed  to  his  veiy  existence 
therein,  is  that  of  access  to  its  material  and  forces. 

So  far  as  we  can  see,  it  is  universally  true  that  matter 
and  energy  are  indestructible,  and  that  the  forms  in  which 
we  apprehend  them  are  but  transmutations  from  forms 
they  have  held  before  ;  that  the  inorganic  cannot  of  itself 
pass  into  the  organic;  that  vegetable  life  can  only  come 
from  vegetable  life;  animal  life  from  animal  life;  and 
human  life  from  human  life.  Notwithstanding  all  specu- 
lation on  the  subject,  we  have  never  yet  been  able  to  trace 
the  origin  of  one  well-defined  species  from  another  well- 
defined  species.  Yet  the  way  in  which  we  find  the  orders 
of  existence  superimposed  and  related,  indicates  to  us  design 
or  thought — a  something  of  which  we  have  the  first 
glimpses  only  in  man.  Hence,  while  we  may  explain  the 
world  of  which  our  senses  tell  us  by  a  world  of  which  our 
senses  do  not  tell  us,  a  world  of  what  Plato  vaguely  called 
ideas,  or  what  we  vaguely  speak  of  as  spirit,  yet  we  are 
compelled  when  we  would  seek  for  the  beginning  cause 
and  still  escape  negation  to  posit  a  primary  or  all-causative 
idea  or  spirit,  an  all-producer  or  creator,  for  which  our 
short  word  is  God. 

But  to  keep  within  what  we  do  know.  In  man,  con- 
scious will— that  which  feels,  reasons,  plans  and  contrives, 
in  some  way  that  we  cannot  understand— is  clothed  in 
material  form.  Coming  thus  into  control  of  some  of  the 
energy  stored  up  in  our  physical  bodies,  and  learning,  as 
we  may  see  in  infancy,  to  govern  arms,  legs  and  a  few 


80  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

other  organs,  this  conscious  will  seeks  through  them  to 
grasp  matter  and  to  set  to  work,  in  changing  its  place  and 
form,  other  stores  of  energy.  The  steam-engine  rushing 
along  with  its  long  train  of  coal  or  goods  or  passengers, 
is  in  all  that  is  evident  to  our  senses  but  a  new  form  of 
what  previously  existed.  Everything  of  it  that  we  can 
see,  hear,  touch,  taste,  weigh,  measure  or  subject  to  chem- 
ical tests,  existed  before  man  was.  What  has  brought 
preexisting  matter  and  motion  to  the  shape,  place  and 
function  of  engine  and  train  is  that  which,  prisoned  in 
the  engineer's  brain,  grasps  the  throttle;  the  same  thing 
that  in  the  infant  stretches  for  the  moon,  and  in  the  child 
makes  mud-pies.  It  is  this  conscious  will  seeking  the 
gratification  of  its  desires  in  the  alteration  of  material 
forms  that  is  the  primary  motive  power,  the  active  factor, 
in  bringing  about  the  relations  with  which  political  econ- 
omy deals.  And  while,  whatever  be  its  origin,  this  will  is 
in  the  world  as  we  know  it  an  original  element,  yet  it  can 
act  only  in  certain  ways,  and  is  subject  in  that  action  to 
certain  uniform  sequences,  which  we  term  laws  of  nature. 


CHAPTER  XL 
OF  DESIRES  AND   SATISFACTIONS. 

SHOWING  THE  WIDTH  AND   IMPORTANCE    OF  THE  FIELD  OF 
POLITICAL  ECONOMY. 

Action  springs  from  desire  and  seeks  satisfaction— Order  of  desires- 
Wants  or  needs— Subjective  and  objective  desires— Material  and 
immaterial  desires— The  hierarchy  of  life  and  of  desires. 

LL  human  actions— at  least  all  conscious  and  voluntary 
actions— are  prompted  by  desire,  and  have  for  their 
aim  its  satisfaction.  It  may  be  a  desire  to  gain  something 
or  a  desire  to  escape  something,  as  to  obtain  food  or  to 
enjoy  a  pleasing  odor,  or  to  escape  cold  or  pain  or  a  noi- 
some smell ;  a  desire  to  benefit  or  give  pleasure  to  others, 
or  a  desire  to  do  them  harm  or  give  them  pain.  But 
whether  positive  or  negative,  physical  or  mental,  benefi- 
cent or  injurious,  so  invariably  is  desire  the  antecedent 
of  action  that  when  our  attention  is  called  to  any  human 
action  we  feel  perplexed  if  we  do  not  recognize  the  ante- 
cedent desire  or  motive,  and  at  once  begin  to  look  for  it, 
confident  that  it  has  to  the  action  the  relation  of  cause  to 
effect. 

So  confident,  indeed,  are  we  of  this  necessary  causal 
relation  between  action  and  desire,  that  when  we  cannot 
find,  or  at  least  with  some  plausibility  surmise,  an  ante- 
cedent desire  of  which  the  action  is  an  expression,  we  will 
not  believe  that  the  action  took  place,  or  at  the  least,  will 

81 


82  THE  MEANING  OF   POLITICAL  ECONOMY.     Book  I. 

not  believe  that  it  was  a  voluntary,  conscious  action,  but 
will  assume,  as  the  older  phraseology  put  it,  that  the  man 
was  possessed  by  some  other  human  or  extra-human  will ; 
or,  as  the  more  modern  phrase  puts  it,  that  he  was  insane. 
For  so  unthinkable  is  conscious,  voluntary  action  without 
antecedent  desire,  that  we  will  reject  the  testimony  of 
others  or  even  the  testimony  of  our  own  senses  rather  than 
believe  that  a  conscious  act  can  take  place  without  motive. 

And  as  desire  is  the  prompter,  and  the  satisfaction  of 
desire  is  the  end  and  aim,  of  all  human  action,  all  that  men 
seek  to  do,  to  obtain  or  to  avoid  may  be  embraced  in  one 
term,  as  satisfactions,  or  satisfactions  of  desire. 

But  of  these  desires  and  their  corresponding  satisfac- 
tions, some  are  more  primary  or  fundamental  than  others ; 
and  it  is  only  as  these  desires  obtain  satisfaction  that  other 
desires  arise  and  are  felt.  Thus  the  desire  for  air  is  per- 
haps the  most  fundamental  of  all  human  desires.  Yet  its 
satisfaction  is  under  normal  conditions  so  easily  had  that 
we  usually  are  not  conscious  of  it— it  is  in  fact  rather  a 
latent  than  an  actual  desire.  But  let  one  be  shut  off  from 
air,  and  the  desire  to  get  it  becomes  at  once  the  strongest 
of  desires,  casting  out  for  the  moment  all  others.  So  it  is 
with  other  desires,  such  as  those  for  food  and  drink,  the 
satisfaction  of  which  is  necessary  to  the  maintenance  of 
life  and  health  and  the  avoidance  of  injury  and  pain,  and 
which  we  share  in  common  with  the  brute.  These  primary 
desires  lie  as  it  were  beneath,  or  are  fundamental  to,  the 
manifold  desires  which  arise  in  man  when  they  are  satis- 
fied. For,  while  the  desires  of  other  animals  seem  com- 
paratively speaking  few  and  fixed,  the  desires  of  man  are 
seemingly  illimitable.  He  is  indeed  the  never-satisfied 
animal ;  his  desires  under  normal  conditions  growing  with 
his  power  of  satisfying  them,  without  assignable  limit. 

In  the  same  way  as  we  distinguish  between  necessities 
and  luxuries,  so  do  we  often  distinguish  between  what  we 


Chap.  XL       OF   DESIRES  AND   SATISFACTIONS.  83 

call  "  wants  "  or  "  needs  "  and  what  we  speak  of  simply  as 
desires.  The  desires  whose  satisfaction  is  necessary  to 
the  maintenance  of  life  and  health  and  the  avoidance  of 
injury  and  pain— those  desires,  in  short,  which  come 
closest  to  the  merely  animal  plane— we  are  accustomed  to 
call  "wants"  or  "needs."  At  least  this  is  the  primary 
idea,  though  as  a  matter  of  fact  we  often  speak  of  needs 
or  wants  in  accordance  with  that  usual  standard  of  comfort 
which  we  call  reasonable,  and  which  is  in  a  large  degree 
a  matter  of  habit.  And  thus  while  the  satisfaction  of 
desire  of  some  kind  is  the  end  and  aim  of  all  human 
action,  we  recognize,  though  vaguely,  a  difference  in  rel- 
ative importance  when  we  say  that  the  end  and  aim  of 
human  effort  is  the  satisfaction  of  needs  and  the  gratifica- 
tion of  desires. 

Without  desire  man  could  not  exist,  even  in  his  animal 
frame.  And  those  Eastern  philosophies,  of  which  that  of 
Schopenhauer  is  a  Western  version,  that  teach  that  the 
wise  man  should  seek  the  extinction  of  all  desire,  also 
teach  that  such  attainment  would  be  the  cessation  of  in- 
dividual existence,  which  they  hold  to  be  in  itself  an  evil. 
But  in  fact,  as  man  develops,  rising  to  a  higher  plane,  his 
desires  infallibly  increase,  if  not  in  number  at  least  in 
quality,  becoming  higher  and  broader  in  their  end  and  aim. 

Now,  of  human  desires  and  their  corresponding  satis- 
factions, some  may  be  subjective,  that  is,  relating  to  the 
individual  mind  or  thinking  subject ;  and  some  objective, 
that  is,  relating  to  the  external  world,  the  object  of  its 
thought.  And  by  another  distinction,  some  may  be  said 
to  be  immaterial,  that  is,  relating  to  things  not  cognizable 
by  the  senses,  i.e.,  thought  and  feeling;  and  some  to  be 
material,  that  is,  relating  to  things  cognizable  by  the 
senses,  i.e.,  matter  and  energy. 

There  is  a  difference  between  these  two  distinctions,  but 
practically  it  is  not  a  large  one.  A  subjective  desire— as 


84  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

when  I  desire  greater  love  or  greater  knowledge  or  hap- 
piness for  and  in  my  own  mind— is  always  an  immaterial 
desire.  Bnt  it  does  not  follow  that  an  objective  desire  is 
always  a  material  desire,  since  I  may  desire  greater  love 
or  knowledge  or  happiness  for  and  in  the  mind  of  another. 
Yet  we  have  to  remember:  1.  That  much  that  we  are 
prone  to  consider  as  immaterial  seems  to  be  so  only  be- 
canse  the  words  we  use  involve  a  purely  ideal  abstraction 
of  qualities  from  things  they  qualify,  and  without  which 
they  cannot  exist  as  things  really  conceived.  Love, 
knowledge  or  happiness  presupposes  something  which 
loves,  knows  or  feels,  as  whiteness  presupposes  a  thing 
which  is  white.  2.  That  while  such  qualities  as  love, 
knowledge  or  happiness  may  be  predicated  of  objective 
though  immaterial  things,  yet,  normally  at  least,  we  can 
have  no  cognizance  of  such  an  immaterial  thing,  or  of  its 
states  or  conditions,  except  through  the  material.  De- 
prived of  the  senses  of  sight,  sound,  touch,  taste  and  smell, 
the  gates  through  which  the  ego  becomes  conscious  of  the 
material  world,  how,  in  any  normal  way,  could  I  or  you 
know  of  the  love,  knowledge,  happiness  or  existence  of  any 
other  such  being?  Except,  indeed,  there  be  some  direct 
way  in  which  spirit  may  have  knowledge  of  spirit— a  way 
it  may  be  that  is  opened  when  that  through  the  material 
by  the  gates  of  the  senses  is  closed — the  exclusion  of  the 
material  is  therefore  a  practical  exclusion  of  the  objective. 
I  speak  of  this  for  the  purpose  of  showing  how  nearly 
the  field  of  material  desires  and  satisfactions,  within  which 
the  sphere  of  political  economy  lies,  comes  to  including  all 
human  desires  and  satisfactions.  And  when  we  consider 
how  in  man  the  subjective  is  bound  in  with  the  objective, 
the  spiritual  with  the  material,  the  importance  of  material 
desires  and  satisfactions  to  human  life  as  a  whole  is  even 
clearer.  For  though  we  may  be  forced  to  realize,  as  the 
innermost  essential  of  man,  a  something  that  is  not 
material ;  yet  this  spirit  or  soul,  as  in  this  life  we  know  it, 


Chap.  XL       OF  DESIRES  AND  SATISFACTIONS.  85 

is  incased  and  imprisoned  in  matter.  Even  if  subjective 
existence  be  possible  without  the  body,  the  ego  as  we  know 
it,  deprived  of  touch  with  matter  through  the  senses,  would 
be  condemned  to  what  may  be  likened  to  solitary  impris- 
onment. 

As  vegetable  life  is  built,  so  to  speak,  upon  inorganic 
existence,  and  the  animal  may  be  considered  as  a  self- 
moving  plant,  plus  perhaps  an  animal  soul  j  so  man  is  an 
animal  plus  a  human  soul,  or  reasoning  power.  And  while, 
for  reasons  I  have  touched  on,  we  are  driven  when  we 
think  of  ultimate  origins  to  consider  the  highest  element 
of  which  we  know  as  the  originating  element,  yet  we  are 
irresistibly  compelled  to  think  of  it  as  having  first  laid  the 
foundation  before  raising  the  superstructure.  This  is  the 
profound  truth  of  that  idea  of  evolution  which  all  theories 
of  creation  have  recognized  and  must  recognize,  but  which 
is  not  to  be  confounded  with  the  materialistic  notion  of 
evolution  which  has  of  late  years  been  popularized  among 
superficial  thinkers.  The  wildest  imagination  never 
dreamed  that  first  of  all  man  came  into  being;  then  the 
animals  •  afterwards  the  plants ;  then  the  earth ;  and  finally 
the  elementary  forces.  In  the  hierarchy  of  life,  as  we 
know  it,  the  higher  is  built  upon  the  lower,  order  on  order, 
and  is  as  summit  to  base.  And  so  in  the  order  of  human 
desires,  what  we  call  needs  come  first,  and  are  of  the 
widest  importance.  Desires  that  transcend  the  desires  of 
the  animal  can  arise  and  seek  gratification  only  when  the 
desires  we  share  with  other  animals  are  satisfied.  And 
those  who  are  inclined  to  deem  that  branch  of  philosophy 
which  is  concerned  with  the  gratification  of  material  needs, 
and  especially  with  the  way  in  which  men  are  fed,  clothed 
and  sheltered,  as  a  secondary  and  ignoble  science,  are  like 
a  general  so  absorbed  in  the  ordering  and  moving  of  his 
forces  as  utterly  to  forget  a  commissariat ;  or  an  architect 
who  should  deem  the  ornamentation  of  a  facade  more  im- 
portant than  the  laying  of  a  foundation. 


CHAPTER  XII. 

THE  FUNDAMENTAL  LAW  OF  POLITICAL 
ECONOMY. 

SHOWING  THAT  THE  LAW  FROM  WHICH  POLITICAL  ECONOMY 
PROCEEDS  IS  THAT  MEN  SEEK  TO  SATISFY  THEIR  DESIRES 
WITH  THE  LEAST  EXERTION. 

Exertion  followed  by  weariness—  The  fact  that  men  seek  to  satisfy 
their  desires  with  the  least  exertion—  Meaning  and  analogue— 
Exemplified  in  trivial  things  —  Is  a  law  of  nature  and  the  funda- 
mental law  of  political  economy—  Substitution  of  selfishness  for 
this  principle—  Buckle  quoted—  Political  economy  requires  no 
such  assumption  —  The  necessity  of  labor  not  a  curse. 


only  way  man  has  of  satisfying  his  desires  is  by 

I     action. 

Now  action,  if  continued  long  enough  in  one  line  to 
become  really  exertion,  a  conscious  putting  forth  of  effort, 
produces  in  the  consciousness  a  feeling  of  reluctance  or 
weariness.  This  comes  from  something  deeper  than  the 
exhaustion  of  energy  in  what  we  call  physical  labor  ;  for 
whoever  has  tried  it  knows  that  one  may  lie  on  his  back 
in  the  most  comfortable  position  and  by  mere  dint  of  sus- 
tained thinking,  without  consciously  moving  a  muscle,  tire 
himself  as  truly  as  by  sawing  wood  ;  and  that  the  mere 
clash  and  conflict  of  involuntary  or  undirected  thought  or 
feeling,  or  its  continuance  in  one  direction,  will  soon  bring 
extreme  weariness. 


Chap.  XII.       THE  LAW  OF  POLITICAL  ECONOMY.  87 

But  whatever  be  its  ultimate  cause,  the  fact  is  that  labor, 
the  attempt  of  the  conscious  will  to  realize  its  material 
desire,  is  always,  when  continued  for  a  little  while,  in  itself 
hard  and  irksome.  And  whether  from  this  fact  alone,  or 
from  this  fact,  conjoined  with  or  based  upon  something 
intuitive  to  our  perceptions,  the  further  fact,  testified  to 
both  by  observation  of  our  own  feelings  and  actions  and 
by  observation  of  the  acts  of  others,  is  that  men  always 
seek  to  gratify  their  desires  with  the  least  exertion. 

This,  of  course,  does  not  mean  that  they  always  succeed 
in  doing  so,  any  more  than  the  physical  law  that  motion 
tends  to  persist  in  a  straight  line  means  that  moving 
bodies  always  take  that  line.  But  it  does  mean  the  mental 
analogue  of  the  physical  law  that  motion  seeks  the  line  of 
least  resistance— that  in  seeking  to  gratify  their  desires 
men  will  always  seek  the  way  which  under  existing  physi- 
cal, social  and  personal  conditions  seems  to  them  to  involve 
the  least  expenditure  of  exertion. 

Whoever  would  see  this  disposition  of  human  nature 
exemplified  in  trivial  things  has  only  to  watch  the  passers- 
by  in  a  crowded  street,  or  those  who  enter  or  depart  from 
a  frequented  house.  He  will  be  instructed  and  perhaps 
not  a  little  amused  to  note  how  slight  the  obstruction 
or  semblance  of  obstruction  that  will  divert  their  steps ; 
and  will  see  the  principle  observed  by  saint  and  sinner— 
by  "  wicked  man  on  evil  errand  bent,"  and  "  Good  Samar- 
itan intent  on  works  of  mercy." 

Whether  it  proceed  from  experience  of  the  irksomeness 
of  labor  and  the  desire  to  avoid  it,  or  further  back  than 
that,  have  its  source  in  some  innate  principle  of  the  human 
constitution,  this  disposition  of  men  to  seek  the  satisfaction 
of  their  desires  with  the  minimum  of  exertion  is  so  uni- 
versal and  unfailing  that  it  constitutes  one  of  those  in- 
variable sequences  that  we  denominate  laws  of  nature,  and 
from  which  we  may  safely  reason.  It  is  this  law  of  nature 


88  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

that  is  the  fundamental  law  of  political  economy— the 
central  law  from  which  its  deductions  and  explanations 
may  with  certainty  be  drawn,  and,  indeed,  by  which  alone 
they  become  possible.  It  holds  the  same  place  in  the 
sphere  of  political  economy  that  the  law  of  gravitation 
does  in  physics.  Without  it  there  could  be  no  recognition 
of  order,  and  all  would  be  chaos. 

Yet  the  failure  clearly  to  apprehend  this  as  the  funda- 
mental law  of  political  economy  has  led  to  very  serious 
and  wide-spread  mistakes  as  to  the  nature  of  the  science ; 
and  has  indeed,  in  spite  of  the  vigorous  assertions  and 
assumptions  of  its  accredited  professors,  prevented  it  from 
truly  taking  in  popular  esteem  the  place  of  a  real  science, 
or  from  long  holding  in  scholastic  circles  the  credit  it  had 
for  a  while  gained.  For  the  principle  that  men  always 
seek  to  satisfy  their  desires  with  the  least  exertion,  there 
has  been  substituted,  from  the  time  that  political  economy 
began  to  claim  the  attention  of  thoughtful  men,  the  prin- 
ciple of  human  selfishness.  And  with  the  assumption  that 
political  economy  takes  into  its  account  only  the  selfish 
feelings  of  human  nature,  there  have  been  linked,  as  laws 
of  political  economy,  other  assumptions  as  destitute  of 
validity. 

To  show  how  completely  the  idea  has  prevailed  that  the 
foundation  of  political  economy  is  the  assumption  of 
human  selfishness,  I  shall  not  stop  to  quote  from  the 
accredited  writers  on  the  subject,  nor  yet  from  those  who 
have  made  of  it  a  ground  of  their  repugnance  to  the 
political  economy  that  has  been  with  justice  styled  "the 
dismal  science  "—such  as  Carlyle,  Dickens  or  Ruskin.  I 
take  for  that  purpose  a  writer  who,  while  he  fully  accepted 
what  was  at  his  time  (1857-60)  the  orthodox  political  econ- 
omy, deeming  it  "  the  only  subject  immediately  connected 
with  the  art  of  government  that  has  yet  been  raised  to  a 
science,"  and  was  well  conversant  with  its  literature,  was 


Chap.  XII.       THE  LAW  OF   POLITICAL  ECONOMY.  89 

not  concerned  with  it  as  a  controversialist,  but  only  as  a 
historian  of  the  development  of  thought. 

Buckle's  understanding  of  political  economy  was  that 
it  eliminated  every  other  feeling  than  selfishness.  In  his 
"  Inquiry  into  the  Influence  Exercised  by  Religion,  Litera- 
ture and  Government "  (Vol.  I.,  Chapter  V.,  of  his  "  History 
of  Civilization  in  England  "),  he  says  that  in  the  "  Wealth 
of  Nations/'  which  he  regards  as  "  probably  the  most 
important  book  which  has  ever  been  written/'  Smith 
"  generalizes  the  laws  of  wealth,  not  from  the  phenomena 
of  wealth,  nor  from  statistical  statements,  but  from  the 
phenomena  of  selfishness;  thus  making  a  deductive  ap- 
plication of  one  set  of  mental  principles  to  the  whole  set 
of  economical  facts." 

And  in  his  "  Examination  of  the  Scotch  Intellect  during 
the  Eighteenth  Century  "  (Vol.  II.,  Chapter  VI.),  he  returns 
in  greater  detail  to  the  same  subject.  Adam  Smith,  he 
says,  wrote  two  great  books,  with  an  interval  of  seventeen 
years  between  them.  In  both  he  employed  the  same 
method,  that  form  of  deduction  "which  proceeds  by  an 
artificial  separation  of  facts  in  themselves  inseparable." 
In  the  first  of  these,  the  "  Theory  of  Moral  Sentiments," 
he  "so  narrowed  the  field  of  inquiry  as  to  exclude  from  it 
all  consideration  of  selfishness  as  a  primary  principle,  and 
only  to  admit  its  great  antagonist,  sympathy."  In  the 
second,  the  ^  Wealth  of  Nations,"  which  Buckle  regards  as 
a  correlative  part  of  Smith's  one  great  scheme,  though  still 
greater  than  its  predecessor,  Smith,  on  the  contrary,  "  as- 
sumes that  selfishness  is  the  main  regulator  of  human 
affairs,  just  as  in  his  previous  work  he  had  assumed  sym- 
pathy to  be  so."  Or,  as  Buckle,  later  on,  repeats : 

He  everywhere  assumes  that  the' great  moving  power  of  all  men, 
all  interests  and  all  classes,  in  all  ages  and  in  all  countries,  is  selfish- 
ness. The  opposite  power  of  sympathy  he  entirely  shuts  out ;  and  I 
hardly  remember  an  instance  in  which  even  the  word  occurs  in  the 


90  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

whole  course  of  his  work.  Its  fundamental  assumption  is,  that  each 
man  exclusively  follows  his  own  interest,  or  what  he  deems  to  be  his 
own  interest.  ...  In  this  way  Adam  Smith  completely  changes  the 
premises  he  had  assumed  in  his  earlier  work.  Here,  he  makes  men 
naturally  selfish ;  formerly,  he  had  made  them  naturally  sympathetic. 
Here,  he  represents  them  pursuing  wealth  for  sordid  objects,  and  for 
the  narrowest  personal  pleasures ;  formerly,  he  represented  them 
as  pursuing  it  out  of  regard  to  the  sentiments  of  others,  and  for  the 
sake  of  obtaining  their  sympathy.  In  the  "  Wealth  of  Nations  "  we 
hear  no  more  of  this  conciliatory  and  sympathetic  spirit  j  such  ami- 
able maxims  are  altogether  forgotten,  and  the  affairs  of  the  world 
are  regulated  by  different  principles.  It  now  appears  that  benevo- 
lence and  affection  have  110  influence  over  our  actions.  Indeed, 
Adam  Smith  will  hardly  admit  common  humanity  into  his  theory  of 
motives.  If  a  people  emancipate  their  slaves,  it  is  a  proof,  not  that 
the  people  are  acted  on  by  high  moral  considerations,  nor  that  their 
sympathy  is  excited  by  the  cruelty  inflicted  on  these  unhappy  crea- 
tures. Nothing  of  the  sort.  Such  inducements  to  conduct  are 
imaginary  and  exercise  no  real  sway.  All  that  the  emancipation 
proves,  is,  that  the  slaves  were  few  in  number,  and,  therefore,  small 
in  value.  Otherwise  they  would  not  have  been  emancipated. 

So,  too,  while  in  his  former  work  he  had  ascribed  the  different 
systems  of  morals  to  the  power  of  sympathy,  he,  in  this  work,  ascribes 
them  entirely  to  the  power  of  selfishness. 

This  presumption,  so  well  stated  and  defended  by 
Buckle,  that  political  economy  must  eliminate  everything 
but  the  selfish  feelings  of  mankind,  has  continued  to 
pervade  the  accredited  political  economy  up  to  this  time, 
whatever  may  have  been  the  effects  upon  the  common 
mind  of  the  attacks  made  upon  it  by  those,  who,  not 
putting  their  objections  into  logical  and  coherent  form, 
could  be  spoken  of  as  sentimentalists,  but  not  political 
economists.  Yet,  however  generally  the  accepted  writers 
on  political  economy  may  have  themselves  supposed  the 
assumption  of  universal  selfishness  to  be  the  fundamental 
principle  of  political  economy,  or  how  much  ground  they 
may  have  given  for  such  a  supposition  on  the  part  of  their 
readers,  a  true  political  economy  requires  no  such  assump- 


CJiap.XIL       THE  LAW  OF   POLITICAL  ECONOMY.  91 

tion.  The  primary  postulate  on  and  from  which  its  whole 
structure  is  built  is  not  that  all  men  are  governed  only  by 
selfish  motives,  or  must  for  its  purposes  be  considered  as 
governed  only  by  selfish  motives ;  it  is  that  all  men  seek 
to  gratify  their  desires,  whatever  those  desires  may  be, 
with  the  least  exertion.  This  fundamental  law  of  political 
economy  is,  like  all  other  laws  of  nature,  so  far  as  we  are 
concerned,  supreme.  It  is  no  more  affected  by  the  selfish- 
ness or  unselfishness  of  our  desires  than  is  the  law  of 
gravitation.  It  is  simply  a  fact. 

The  irksomeness  or  weariness  that  inevitably  attends 
all  continued  exertion  caused  earlier  men  to  look  on  the 
necessity  of  labor  to  production  as  a  penalty  imposed  upon 
our  kind  by  an  offended  Deity.  But  in  the  light  of  modern 
civilization  we  may  see  that  what  they  deemed  a  curse  is 
in  reality  the  impulse  that  has  led  to  the  most  enormous 
extensions  of  man's  power  of  dealing  with  nature.  So 
true  is  it  that  good  and  evil  are  not  in  external  things  or 
in  their  laws  of  action,  but  in  will  or  spirit. 


CHAPTER  XIII. 
METHODS  OF  POLITICAL  ECONOMY. 

SHOWING  THE  NATURE  OF  THE  METHODS  OF  INVESTIGATION 
THAT  MAY  BE  USED  IN  POLITICAL  ECONOMY. 

Deductive  and  inductive  schools— "New  American  Cyclopedia'' 
quoted — Triumph  of  the  inductionists — The  method  of  induction 
and  the  method  of  deduction — Method  of  hypothesis — Bacon's  re- 
lation to  induction— Real  error  of  the  deductionists  and  the  mistake 
of  the  inductionists — Lalor's  Cyclopedia  quoted — Result  of  the 
triumph  of  the  inductionists— A  true  science  of  political  econ- 
omy must  follow  the  deductive  method — Davis's  "Elements  of 
Inductive  Logic  "  quoted — Double  assurance  of  the  real  postulate 
of  political  economy — Method  of  mental  or  imaginative  experiment. 

A  MISCONCEPTION  of  the  fundamental  law  on  which 
a  science  is  based  must  lead  to  divergences  and  con- 
fusions as  the  attempt  to  develop  that  science  proceeds. 

In  the  case  of  political  economy,  the  result  of  the  as- 
sumption that  its  fundamental  principle  is  human  selfish- 
ness is  shown  in  disputes  and  confusions  as  to  its  proper 
method.  These  began  shortly  after  it  was  recognized  as 
deserving  the  attention  of  the  institutions  of  learning,  and 
are  an  increasingly  noticeable  feature  in  economic  litera- 
ture for  some  sixty  or  seventy  years.  Adam  Smith  and 
the  most  prominent  of  his  successors  followed  the  deduc- 
tive method.  But  ere  long  there  began  to  be  questionings 
as  to  whether  the  inductive  method  was  not  the  proper 

92 


^  UNIVERSITY 
Chap.  XIII.     METHODS  OF  POLITICAL  ECONOMY. 

one.  Having  on  their  side  the  weight  of  authority,  the 
defenders  of  the  deductive  method,  or  "  old  school "  politi- 
cal economy,  as  it  began  to  be  called,  held  for  a  long  time 
their  formal  position,  though  compelled  by  the  incon- 
gruities of  the  system  they  were  endeavoring  to  uphold  to 
make  damaging  deductions  and  weakening  admissions; 
while  the  opposition  to  them,  called  by  various  names,  but 
generally  known  as  inductive  or  "  new  school"  economists, 
gathered  strength. 

What  lay  beneath  this  contest,  which  was  largely  verbal, 
and  in  which  there  was  confusion  on  both  sides,  I  shall 
have  occasion  to  speak  of  hereafter;  but  as  to  how  it 
seemed  to  stand  in  the  scholastic  world  at  the  beginning 
of  the  seventh  decade  of  our  century  I  quote  from  the 
article  "  Political  Economy"  in  the  "  New  American  Cyclo- 
pedia" (1861),  which,  as  written  by  an  opponent  of  the 
then  orthodox  school  (Henry  Carey  Baird),  with  an  evident 
desire  to  be  entirely  fair,  will  I  think  better  show  the  actual 
situation  at  that  time  than  anything  else  I  can  find : 

The  progress  thus  far  made  in  political  economy  has  been  slow  and 
uncertain,  and  there  is  in  its  entire  range  hardly  a  doctrine  or  even 
the  definition  of  an  important  word  which  is  universally  or  even 
generally  accepted  beyond  dispute.  .  .  .  Amid  all  their  discords  and 
disagreements  it  is  possible  to  divide  political  economists  under  two 
general  heads :  those  who  treat  the  subject  as  a  deductive  science, 
"in  which  all  the  general  propositions  are  in  the  strictest  sense  of 
the  word  hypothetical ;  "  and  those  who  treat  it  by  the  inductive  or 
Baconian  method.  Of  the  first-named  school  are  all  the  English 
economists  and  most  of  those  of  continental  Europe  who  have  ac- 
quired any  reputation.  As  the  representatives  of  the  last,  Mr.  Henry 
C.  Carey  and  his  followers  are  most  prominent,  * 

*  As  illustrating  the  looseness  with  which  the  words  "inductive" 
and  "  deductive  "  have  been  thrown  around  in  this  discussion  as  to 
the  proper  method  of  political  economy,  it  may  be  worth  mentioning 
that  the  same  Henry  C.  Carey,  who  is  here  cited  as  the  most  promi- 
nent representative  of  the  inductive  school,  as  opposed  to  the  deduc- 


94  THE   MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

Thus,  in  1861,  the  deductive  method,  even  to  the  view 
of  an  adherent  of  the  opposing  school,  still  formally  held 
sway  in  the  scholastic  world.  But  at  present,  as  the  cen- 
tury nears  its  close,  it  has  so  utterly  lost  its  hold  that  so 
far  as  I  can  discover,  there  is  not  now  a  prominent  college 
or  university  anywhere  in  which  the  professed  teachers  of 
what  is  reputed  to  be  political  economy  adhere  to  what 
was  then  called  the  deductive  method. 

Yet  this  triumph  in  scholastic  opinion  of  the  advocates 
of  what  is  called  the  inductive  method  is  in  reality  but  the 
triumph  of  one  set  of  confusions  over  another  set  of  con- 
fusions, in  which  the  determining  element  has  been  the 
vague  consciousness  that  the  previously  authoritative 
political  economy  was  not  a  true  political  economy. 
Where  a  new  set  of  confusions  is  pitted  against  an  old 
set  of  confusions,  the  victory  must  finally  and  for  a  time 
remain  with  the  new ;  for  the  reason  that  on  the  old  lies 
the  burden  of  defending  what  is  indefensible,  while  the 
new  has  for  a  while  only  the  easier  task  of  attack.  What 
this  passing  phase  of  economic  thought  really  shows  is  the 
utter  confusion  into  which  the  whole  scholastic  political 
economy  has  fallen  from  lack  of  care  as  to  first  principles. 
In  my  view  of  the  matter  those  who  have  said  that  the 
deductive  method  was  the  proper  method  of  political  econ- 
omy have  been  right  as  to  that,  but  wrong  in  principles 
from  which  they  have  made  deductions ;  while  those  who 
contended  for  the  inductive  method  have  been  wrong  as 
to  that,  but  right  as  to  the  weaknesses  of  their  opponents. 

As  to  the  course  of  what  has  been  called  the  science  of 


five  school  of  Smith,  Eicardo  and  Mill,  is  in  the  biographical  notice 
of  him  in  the  latest  successor  of  the  "New  American  Cyclopedia," 
the  revised  edition  of  "  Johnson's  Universal  Cyclopedia"  (1895),  said 
to  be  "  the  founder  of  a  school  of  political  economy  whose  principles 
are  anti-socialistic  and  more  deductive  than  those  of  Smith,  Kicardo 
and  Mill." 


Chap.  XIII.     METHODS  OF  POLITICAL  ECONOMY.  95 

political  economy  and  the  destructive  revolution  which  it 
has  of  late  years  undergone,  I  shall  have  occasion  to  speak 
in  the  next  book.  I  am  here  concerned  in  clearing  only 
what  might  be  a  perplexity  to  the  reader  in  regard  to  the 
proper  methods  of  the  real  science. 

The  human  reason  has  two  ways  of  ascertaining  truth. 
The  first  of  these  is  that  of  reasoning  from  particulars  to 
generals  in  an  ascending  line,  until  we  come  at  last  to  one 
of  those  invariable  uniformities  that  we  call  laws  of  nature. 
This  method  we  call  the  inductive,  or  a  posteriori.  But 
when  we  have  reached  what  we  feel  sure  is  a  law  of  na- 
ture, and  as  such  true  in  all  times  and  places,  then  an 
easier  and  more  powerful  method  of  ascertaining  truth  is 
open  to  us— the  method  of  reasoning  in  the  descending 
line  from  generals  to  particulars.  This  is  the  method  that 
we  call  the  deductive,  or  a  priori  method.  For  knowing 
what  is  the  general  law,  the  invariable  sequence  that  we 
call  a  law  of  nature,  we  have  only  to  discover  that  a  par- 
ticular comes  under  it  to  know  what  is  true  in  the  case  of 
that  particular. 

In  the  relation  of  priority  the  two  methods  stand  in  the 
order  in  which  I  have  named  them— induction  being  the 
first  or  primary  method  of  applying  human  reason  to  the 
investigation  of  facts,  and  deduction  being  the  second  or 
derivative.  So  far  as  our  reason  is  concerned,  induction 
must  give  the  facts  on  which  we  may  proceed  to  deduction. 
Deduction  can  safely  be  based  only  on  what  has  been  sup- 
plied to  the  reason  by  induction ;  and  where  the  validity 
of  this  first  step  is  called  in  question,  must  apply  to  induc- 
tion for  proof.  Both  methods  are  proper  to  the  careful 
investigation  that  we  speak  of  as  scientific :  induction  in 
its  preliminary  stages,  when  it  is  groping  for  the  law  of 
nature ;  deduction  when  it  has  discovered  that  law,  and  is 
thus  able  to  proceed  by  a  short  cut  from  the  general  to 
the  particular,  without  any  further  need  for  the  more 


96  THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

laborious  and,  so  to  speak,  uphill  method  of  induction, 
except  it  may  be  to  verify  its  conclusions. 

There  is  a  further  method  of  investigation,  which  con- 
sists in  a  combination  of  these  two  original  methods  of 
the  reason,  and  which  has  been  found  most  effective  in  the 
discovery  of  truth  in  the  physical  sciences.  When  our 
inductions  so  point  to  the  existence  of  a  natural  law  that 
we  are  able  to  form  a  surmise  or  suspicion  of  what  it  may 
prove  to  be,  we  may  tentatively  assume  the  existence  of 
such  a  law,  and  proceed  to  see  whether  particulars  will  fall 
into  place  in  deductions  made  from  it.  This  is  the  method 
of  tentative  deduction,  or  hypothesis. 

The  inductive  method  is  sometimes,  as  in  the  last  quota- 
tion I  have  made,  spoken  of  as  the  Baconian  method,  and 
the  great  name  of  Bacon  has  been  freely  used  to  give 
plausibility  to  what  the  advocates  of  the  "  new  school "  in 
political  economy  have  called  the  inductive  method.  But 
whatever  originality  there  may  have  been  in  his  classifica- 
tions and  devices,  Bacon  did  not  invent  the  inductive 
method.  It  was  by  that  method  that  man's  reason  has 
from  the  first  enabled  him  to  apprehend  laws  of  nature 
that  he  has  subsequently  used  as  bases  for  deduction.  It 
was  thus  that  he  must  have  learned  what  we  are  accus- 
tomed to  think  the  simplest  of  nature's  uniformities— such 
as,  that  after  an  interval  a  new  moon  succeeds  the  old 
moon  j  that  the  sun,  after  apparently  tending  to  the  south 
for  a  while,  turns  again  to  the  north ;  that  fire  will  burn, 
and  that  water  will  quench  fire.  What  Bacon  did  was 
not  to  invent  or  discover  the  inductive  method,  but  to 
formulate  some  rules  for  its  application  and  to  apply  it  to 
the  investigation  of  fields  of  knowledge  from  which  it  had 
been  long  shut  out  by  a  blind  reliance  upon  authority— 
by  a  false  assumption  that  wiser  men  who  had  gone  before 
had  taught  all  there  was  worth  knowing  on  certain  sub- 
jects, and  that  there  remained  for  those  who  came  after 


Chap.  XIII.     METHODS  OF  POLITICAL  ECONOMY.  97 

nothing  further  to  do  than  to  make  deductions  from 
premises  their  predecessors  had  supplied. 

Where  the  application  of  the  inductive  method  was 
really  needed  in  what  is  now  called  by  the  "new  lights" 
the  "  classical"  political  economy  was  to  test  the  premises 
from  which  its  deductions  were  made,  and  to  clear  them 
of  what  had  no  better  warrant  than  a  disposition  to  use 
political  economy  to  justify  existing  social  arrangements. 
It  was  not  needed  to  take  the  place  of  the  deductive 
method,  where  that  was  applicable.  For  the  deductive 
method,  when  applied  to  the  further  extension  of  what 
has  already  been  validly  ascertained,  constitutes  the  most 
powerful  means  of  extending  knowledge  that  the  human 
mind  can  avail  itself  of. 

In  its  use  of  the  deductive  method  after  its  premises 
had  been  settled,  the  classical  political  economy  was  not 
in  error.  The  error  that  gave  insecurity  to  its  whole 
structure  lay  deeper  still,  in  the  insufficient  inductions  on 
which  those  premises  rested.  But,  instead  of  addressing 
themselves  to  these  flaws  in  its  accepted  premises,  the 
various  schools  of  economists  generally  classed  as  induc- 
tive have  denied  that  there  were  any  general  principles 
that  could  with  certainty  be  laid  down  as  the  basis  for 
deduction.  Thus,  if  such  a  question  be  asked  them  as, 
does  free  trade  or  protection  best  promote  a  general  pros- 
perity? or,  what  is  the  best  system  of  land-tenure?  or, 
what  is  the  best  system  of  taxation  ?  or,  what  are  the  limits 
of  governmental  interference  with  industry,  or  trade-union 
regulations  ?  no  general  answer  can  be  given.  It  can  only 
be  said  that  one  thing  may  be  best  in  one  place  and  time, 
and  another  in  another  place  and  time,  so  that  the  matter 
can  be  determined  only  by  special  investigations.  In  other 
words,  to  quote  the  phrase  of  Professor  James,  of  the 
University  of  Pennsylvania,  an  adherent  of  the  "new 
school "  (article,  "  Political  Economy,"  in  Lalor's  "  Cyclo- 


98  THE  MEANING   OF  POLITICAL  ECONOMY.     Book  I. 

pedia  of  Political  Science,  Political  Economy  and  United 
States  History,"  1884),  they  have  opposed  "the  theory 
which  seeks  eternally  valid  natural  laws  in  economics, 
and  which  considers  the  natural  condition  of  unlimited 
personal  freedom  as  the  only  justifiable  one,  without  regard 
to  the  needs  of  special  times  and  nations." 

The  result,  therefore,  of  the  triumph  of  the  "  induction- 
ists"  over  the  "  deductionists  "  in  the  accredited  organs  of 
economic  teaching,  has  been  to  destroy  in  the  "new" 
political  economy  even  the  semblance  of  coherency  that 
it  had  in  the  "  old,"  and  to  decompose  it  into  a  congeries 
of  unrelated  doctrines  and  unverified  speculations  which 
only  its  professors  can  presume  to  understand,  and  as  to 
which  they  can  dispute  and  quarrel  with  each  other  in  the 
wild  abandon  that  results  from  the  absence  of  any  recog- 
nized common  principle. 

But  to  me  it  seems  clear  that  if  political  economy  can 
be  called  a  science  at  all,  it  must  as  a  science,  that  is  to 
say  from  the  moment  the  laws  of  nature  on  which  it 
depends  are  discovered,  follow  the  deductive  method  of 
examination,  using  induction  only  to  test  the  conclusions 
thus  obtained.  For  the  particulars  which  are  included  in 
its  province  are  too  vast  and  too  complex  to  admit  of  any 
hope  of  bringing  them  into  order  and  relation  by  direct 
induction. 

To  quote  from  the  latest  elementary  text-book  of  logic 
of  which  I  know,  Professor  Noah  K.  Davis's  "  Elements  of 
Inductive  Logic  "  (Harper  Bros.,  New  York,  1893),  p.  197 : 

The  great  object  of  the  scientist  is  to  obtain  by  rigid  induction  the 
laws  of  nature,  and  to  follow  them  by  rigid  deduction  to  their  conse- 
quences. A  science  at  first  wholly  inductive  becomes,  as  soon  as  a 
law  has  been  proved,  more  or  less  deductive,  and  as  it  progresses, 
rising  to  higher  and  wider  but  fewer  inductions,  the  deductive 
processes  increase  in  number  and  importance,  until  it  is  no  longer 
properly  an  inductive,  but  a  deductive  science.  Tims,  hydrostatics, 
acoustics,  optics  and  electricity,  commonly  called  inductive  sciences, 


Chap.  XIII.     METHODS  OF  POLITICAL  ECONOMY.  99 

have  passed  under  the  dominion  of  mathematics,  from  inductive  to 
deductive  sciences  and  mechanics  has  a  like  history.  Celestial 
mechanics  as  founded  in  the  "  Principia  "  of  Newton  is  mainly  induc- 
tive, as  elaborated  in  the  "Mecanique  Celeste"  of  Laplace,  is 
mainly  deductive.  By  pursuing  this  latter  process  it  has  multiplied 
its  matter  and  reached  its  present  high  perfection.  A  revolution  is 
quietly  progressing  in  all  the  natural  sciences.  Bacon  changed  their 
method  from  deductive  to  inductive,  and  it  is  now  rapidly  reverting 
from  inductive  to  deductive.  The  task  of  logic  is  to  explicate  and 
regulate  these  methods. 

Now  the  law  of  nature  which  forms  the  postulate  of  a 
true  science  of  political  economy  is  not,  as  has  been  erro- 
neously assumed,  that  men  are  invariably  and  universally 
selfish.  As  a  matter  of  fact,  this  is  not  true.  Nor  can  we 
abstract  from  man  all  but  selfish  qualities  in  order  to  make 
as  the  object  of  our  thought  on  economic  matters  what 
has  been  called  the  "  economic  man/'  without  getting  what 
is  really  a  monster,  not  a  man. 

The  law  of  nature  which  is  really  the  postulate  of  a  true 
science  of  political  economy  is  that  men  always  seek  to 
gratify  their  desires  with  the  least  exertion,  whether  those 
desires  are  selfish  or  unselfish,  good  or  bad. 

That  this  is  a  law  of  nature  we  have  the  highest  possible 
warrant,  wider  in  fact  than  we  can  have  for  any  of  the 
laws  of  external  nature,  such  for  instance  as  the  law  of 
gravitation.  For  the  laws  of  external  nature  can  be  appre- 
hended only  objectively.  But  that  it  is  a  law  of  nature 
that  men  seek  to  gratify  their  desires  with  the  least  exer- 
tion, we  may  see  both  subjectively  and  objectively.  Since 
man  himself  is  included  in  nature,  we  may  subjectively 
reach  the  law  of  nature  that  men  seek  to  gratify  their 
desires  with  the  least  exertion,  by  an  induction  derived 
from  consciousness  of  our  own  feelings  and  an  analysis  of 
our  own  motives  of  action  •  while  objectively  we  may  also 
reach  the  same  law  by  an  induction  derived  from  obser- 
vation of  the  acts  of  others. 


100          THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

Proceeding  from  a  law  of  nature  thus  doubly  assured, 
the  proper  method  of  a  political  economy  which  becomes 
really  a  science  by  its  correct  apprehension  of  a  funda- 
mental law,  is  the  method  of  deduction  from  that  law,  the 
method  of  proceeding  from  the  general  to  the  particular ; 
for  this  is  the  method  which  will  enable  us  to  attain  incom- 
parably greater  results.  To  abandon  that  method  and. 
resort  to  what  the  "  new  lights  "  of  political  economy  seem 
really  to  mean  by  induction,  would  be  as  though  we  were 
to  discard  the  rules  of  arithmetic  and  endeavor  by  direct 
inquiries  in  all  parts  of  the  world  to  discover  how  much 
one  number  added  to  another  would  make,  and  what 
would  be  the  quotient  of  a  sum  divided  by  itself. 

Thus,  in  the  main,  the  science  of  political  economy  re- 
sorts to  the  deductive  method,  using  induction  for  its  tests. 
But  in  its  more  common  investigations  its  most  useful 
instrument  is  a  form  of  hypothesis  which  may  be  called 
that  of  mental  or  imaginative  experiment,*  by  which  we 
may  separate,  combine  or  eliminate  conditions  in  our  own 
imaginations,  and  thus  test  the  working  of  known  prin- 
ciples. This  is  a  most  common  method  of  reasoning, 
familiar  to  us  all,  from  our  very  infancy.  It  is  the  great 
working  tool  of  political  economy,  and  in  its  use  we  have 
only  to  be  careful  as  to  the  validity  of  what  we  assume  as 
principles. 


*  See  lecture  delivered  by  me  before  the  students  of  the  Univer- 
sity of  California  on  "  The  Study  of  Political  Economy,"  April,  1877, 
reprinted  in  "Popular  Science  Monthly,"  March,  1880. 


CHAPTER  XIV. 

POLITICAL  ECONOMY  AS  SCIENCE  AND 
AS   ART. 

SHOWING  THAT  POLITICAL  ECONOMY  IS  PROPERLY  A 
SCIENCE,  AND  THE  MEANING  IT  SHOULD  HAVE  IF  SPOKEN 
OF  AS  ART. 

Science  and  art— There  must  be  a  science  of  political  economy,  but 
no  proper  art — What  must  be  the  aim  of  an  art  of  political  econ- 
omy—White art  and  black  art— Course  of  further  investigation. 

rTl HERE  is  found  among  economic  writers  much  dis- 
J_  pute  not  only  as  to  the  proper  method  of  political 
economy,  but  also  as  to  whether  it  should  be  spoken  of  as 
a  science  or  as  an  art.  There  are  some  who  have  styled 
it  a  science,  and  some  who  have  styled  it  an  art,  and  some 
who  speak  of  it  as  both  science  and  art.  Others  again 
make  substantially  the  same  division,  into  abstract  or 
theoretical  or  speculative  political  economy,  on  the  one 
side,  and  concrete  or  normative  or  regulative  or  applied 
political  economy,  on  the  other  side. 

Into  this  matter,  however,  it  is  hardly  worth  while  for 
us  to  enter  at  any  length,  since  the  reasons  for  considering 
a  proper  political  economy  as  a  science  rather  than  an  art 
have  been  already  given.  It  is  only  necessary  to  observe 
that  where  systematized  knowledge  may  be  distinguished, 
as  it  sometimes  is,  into  two  branches,  science  and  art,  the 

101 


102  THE  MEANING  OF  POLITICAL  ECONOMY.     Boole  I. 

proper  distinction  between  them  is  that  the  one  relates  to 
what  we  call  laws  of  nature ;  the  other  to  the  manner  in 
which  we  may  avail  ourselves  of  these  natural  laws  to 
attain  desired  ends. 

This  first  branch  of  knowledge,  it  is  clear,  is  in  political 
economy  the  primary  and  most  important.  It  is  only  as 
we  know  the  natural  laws  of  the  production  and  distribu- 
tion of  wealth  that  we  can  previse  the  result  of  the  adjust- 
ments and  regulations  which  human  laws  attempt.  And 
as  whoever  wishes  to  understand  and  treat  the  diseases 
and  accidents  of  the  human  frame  would  properly  begin 
by  studying  it  in  its  normal  condition,  noting  the  position, 
relation  and  functions  of  the  organs  in  a  state  of  perfect 
health;  so  any  study  of  the  faults,  aberrations  and  in- 
juries which  occur  in  the  economy  of  society  comes  best 
after  the  study  of  its  natural  and  normal  condition. 

There  may  be  disputes  as  to  whether  there  is  yet  a 
science  of  political  economy,  that  is  to  say,  whether  our 
knowledge  of  the  natural  economic  laws  is  as  yet  so  large 
and  well  digested  as  to  merit  the  title  of  science.  But 
among  those  who  recognize  that  the  world  we  live  in  is  in 
all  its  spheres  governed  by  law,  there  can  be  no  dispute  as 
to  the  possibility  of  such  a  science. 

And  as  there  can  be  only  one  science  of  chemistry,  one 
science  of  astronomy  and  one  science  of  physiology,  which, 
in  so  far  as  they  are  really  sciences,  must  be  true  and  in- 
variable, so,  while  there  may  be  various  opinions,  various 
teachings,  various  hypotheses  (or  in  a  loose  and  improper 
but  exceedingly  common  use  of  the  word,  various  theories), 
of  political  economy,  there  can  be  only  one  science.  And 
it,  in  so  far  as  it  is  really  a  science— that  is  to  say,  in  so 
far  as  we  have  really  discovered  and  related  the  natural 
laws  which  are  within  its  province— must  in  all  times  and 
places  be  true  and  invariable.  For  we  live  in  a  world 
where  the  same  effects  always  follow  the  same  causes  and 


Chap.  XIV.  AS   SCIENCE  AND  AS  ART.  103 

where  nothing  is  capricious,  unless  indeed  it  be  that  some- 
thing within  ns  which  desires,  wills  and  chooses.  But  this 
in  man,  that  seems,  to  a  certain  extent  at  least,  indepen- 
dent of  the  external  nature  that  is  recognized  by  our 
senses,  can  manifest  itself  only  in  accordance  with  natural 
laws,  and  can  accomplish  its  external  purposes  only  by 
using  those  laws. 

When  we  shall  have  worked  out  the  science  of  political 
economy— when  we  shall  have  discovered  and  related  the 
natural  laws  which  govern  the  production  and  distribution 
of  wealth,  we  shall  then  be  in  position  to  see  the  effect  of 
human  laws  and  customs.  But  it  does  not  seem  to  me 
that  a  knowledge  of  the  effect  which  natural  laws  of  the 
production  and  distribution  of  wealth  bring  about  in  the 
outcome  of  human  laws,  customs  and  efforts,  can  be 
properly  spoken  of  as  an  art  of  political  economy,  or  that 
the  knowledge  properly  classified  under  the  term  political 
economy,  can  be  divided,  as  some  writers  have  attempted 
to  divide  it,  into  a  science  and  an  art.  There  is  a  science 
of  astronomy,  which  has  its  applications  in  such  arts  as 
those  of  navigation  and  surveying ;  but  no  art  of  astronomy. 
There  is  a  science  of  chemistry,  which  has  its  applications  in 
many  arts ;  but  no  art  of  chemistry.  And  so  the  science  of 
political  economy  finds  its  applications  in  politics  and  its 
various  subdivisions.  But  these  applications  can  hardly 
be  spoken  of  as  constituting  an  art  of  political  economy. 

Yet  if  we  choose,  as  some  have  done,  to  speak  of  political 
economy  as  both  science  and  art,  then  the  art  of  political 
economy  is  the  art  of  securing  the  greatest  production  and 
the  fairest  distribution  of  wealth;  the  art  whose  proper 
object  it  is  to  abolish  poverty  and  the  fear  of  poverty,  and 
so  lift  the  poorest  and  weakest  of  mankind  above  the  hard 
struggle  to  live.  For  if  there  be  an  art  of  political  econ- 
omy, it  must  be  the  noble  art  that  has  for  its  object  the 
benefit  of  all  members  of  the  economic  community. 


"    OF  THB 
UNIVERSITY 


104          THE  MEANING  OF  POLITICAL  ECONOMY.     Book  I. 

But  just  as  when  men  believed  in  magic  they  held  that 
there  was  both  a  white  magic  and  a  black  magic— an  art 
which  aimed  at  alleviating  suffering  and  doing  good,  and 
an  art  which  sought  knowledge  for  selfish  and  evil  ends— 
so,  in  this  view,  it  may  be  said  that  there  is  a  white  polit- 
ical economy  and  a  black  political  economy.  Where  a 
knowledge  of  the  laws  of  the  production  and  distribution 
of  wealth  is  used  to  enrich  a  few  at  the  expense  of  the 
many,  or  even  where  a  reputed  knowledge  of  those  laws 
is  used  to  bolster  up  such  injustice,  and  by  darkening 
counsel  to  prevent  or  delay  the  reform  of  it,  such  art  of 
political  economy,  real  or  reputed,  is  truly  a  black  art. 
This  is  the  art  of  which  the  great  Turgot  spoke. 


For  our  part,  having  seen  the  nature  and  scope  of  the 
science  of  political  economy,  for  which  we  adopt  the  older 
definition— the  science  that  investigates  the  nature  of 
wealth  and  the  laws  of  its  production  and  distribution— let 
us  proceed  in  this  order,  endeavoring  to  discover :  (1)  the 
nature  of  wealth  •  (2)  the  laws  of  its  production ;  and  then 
(3)  the  laws  of  its  distribution.  When  this  is  done  we 
shall  have  accomplished  all  that  is  necessary  for  a  true 
science  of  political  economy,  as  I  understand  it.  It  will 
not  be  necessary  for  us  to  consider  the  matter  of  the  con- 
sumption of  wealth ;  nor,  indeed,  as  I  shall  hereafter  show, 
is  a  true  political  economy  concerned  with  consumption, 
as  many  of  the  minor  economic  writers  have  assumed  it 
to  be. 


BOOK  II. 


THE  NATURE  OF  WEALTH 


Definitions  are  the  basis  of  systematic  reasoning. 
— Aristotle. 

The  mixture  of  those  things  by  speech  which 
are  by  nature  divided  is  the  mother  of  all  error.  — 
Hooker. 

Bacon  made  us  sensible  of  the  emptiness  of  the 
Aristotelian  philosophy;  Smith,  in  like  manner, 
caused  us  to  perceive  the  fallaciousness  of  all  the 
previous  systems  of  political  economy ;  but  the  lat- 
ter no  more  raised  the  superstructure  of  this  science, 
than  the  former  created  logic.  .  .  .  "We  are,  how- 
ever, not  yet  in  possession  of  an  established  text- 
book on  the  science  of  political  economy,  in  which 
the  fruits  of  an  enlarged  and  accurate  observation 
are  referred  to  general  principles  that  can  be  ad- 
mitted by  every  reflecting  mind ;  a  work  in  which 
these  results  are  so  complete  and  well  arranged  as 
to  afford  to  each  other  mutual  support,  and  that  may 
everywhere  and  at  all  times  be  studied  with  advan- 
tage.— J.  B.  Say,  1803. 

We  may  cite  as  examples  of  such  inchoate  but  yet 
incomplete  discoveries  the  great  "Wealth  of  Na- 
tions "  by  Adam  Smith — a  work  which  still  stands 
out,  and  will  ever  stand  out,  as  that  of  a  pioneer, 
and  the  only  book  on  political  economy  which  dis- 
plays its  genius  to  every  kind  of  intelligent  reader. 
But  among  the  specialists  and  the  schools,  this  work 
of  genius  which  swayed  all  Europe  in  its  day,  is  laid 
upon  the  shelf  as  an  antiquated  affair,  superseded 
by  the  smaller  and  duller  men  who  have  pulled  his 
system  to  pieces  and  are  offering  us  the  fragments 
as  a  science  most  of  whose  first  principles  are  still 
under  dispute.—  Professor  (Greek)  J.  P.  Mahaffy, 
"Tlie  Present  Position  of  Egyptology,"  "Nineteenth 
Century,"  August,  1894. 


CONTENTS  OF  BOOK  II. 

THE  NATURE  OF  WEAI/TH. 


PAGE 

INTRODUCTION  TO  BOOK  II 115 

CHAPTER  I. 
CONFUSIONS  AS   TO  THE  "MEANING  OF  WEALTH. 

SHOWING  THE  FAILURE  OF  THE  CURRENT  POLITICAL  ECONOMY  TO 
DEFINE  WEALTH,  AND  THE  CONFUSIONS  THEREFROM,  CULMI- 
NATING IN  THE  ABANDONMENT  OF  POLITICAL  ECONOMY  BY  ITS 
PROFESSED  TEACHERS. 

Wealth  the  primary  term  of  political  economy — Common  use 
of  the  word — Vagueness  more  obvious  in  political  economy — 
Adam  Smith  not  explicit — Increasing  confusion  of  subsequent 
writers — Their  definitions— Many  make  no  attempt  at  defini- 
tion— Perry's  proposition  to  abandon  the  term — Marshall  and 
Nicholson — Failure  to  define  the  t  rm  leads  to  the  abandon- 
ment of  political  economy — This  <  oncealed  under  the  word 
"economic" — The  intent  expresse  1  by  Macleod — Results  to 
political  economy 117 

CHAPTER  II. 
CAUSES  OF  CONFUSION  AS  TO  THE  MEANING  OF  WEALTH. 

SHOWING    THE    REAL    DIFFICULTY   THAT    BESETS    THE 
ECONOMIC  DEFINITION   OF  WEALTH. 

Effect  of  slavery  on  the  definition  of  wealth — Similar  influences 
now  existing — John  S.  Mill  on  prevalent  delusions — Genesis 

107 


108  CONTENTS   OF  BOOK  II. 

PAGE 

of  the  protective  absurdity — Power  of  special  interests  to 
mold  common  opinion— Of  injustice  and  absurdity,  and  the 
power  of  special  interests  to  pervert  reason — Mill  an  example 
of  how  accepted  opinions  may  blind  men — Effect  upon  a 
philosophical  system  of  the  acceptance  of  an  incongruity — 
Meaning  of  a  saying  of  Christ — Influence  of  a  class  profiting 
by  robbery  shown  in  the  development  of  political  economy — 
Archbishop  Whately  puts  the  cart  before  the  horse — The  power 
of  a  great  pecuniary  interest  to  affect  thought  can  be  ended  only 
by  abolishing  that  interest — This  shown  in  American  slavery  .  131 


CHAPTER  III. 
WHAT  ADAM   SMITH  MEANT  BY  WEALTH. 

SHOWING  HOW  ESSENTIALLY  ADAM  SMITH'S  PRIMARY  CONCEPTION 
OF  WEALTH  DIFFERED  FROM  THAT  NOW  HELD  BY  HIS  SUCCES- 
SORS. 

Significance  of  the  title  "  Wealth  of  Nations" — Its  origin  shown 
in  Smith's  reference  to  the  Physiocrats — His  conception  of 
wealth  in  his  introduction — Objection  by  Malthus  and  by  Mac- 
leod — Smith's  primary  conception  that  given  in  "  Progress  and 
Poverty  "—His  subsequent  confusions 143 

CHAPTER  IV. 
THE  FRENCH  PHYSIOCRATS. 

SHOWING  WHO   THE  FIRST  DEVELOPERS  OF  A  TRUE    SCIENCE 
OF  POLITICAL  ECONOMY  WERE,  AND  WHAT  THEY  HELD. 

Quesnay  and  his  followers — The  great  truths  they  grasped  and 
the  cause  of  the  confusion  into  which  they  fell — This  used  to 
discredit  their  whole  system,  but  not  really  vital — They  were 
real  free  traders — The  scant  justice  yet  done  them— Reference 
to  them  in  "Progress  and  Poverty "— Maeleod's  statement  of 
their  doctrine  of  natural  order — Their  conception  of  wealth — 
Their  day  of  hope  and  their  fall 148 


CHAPTER  V. 
ADAM  SMITH  AND  THE  PHYSIOCRATS. 

SHOWING  THE  RELATION  BETWEEN  ADAM   SMITH  AND  THE 
PHYSIOCRATS. 

Smith  and  Quesnay— The  "  Wealth  of  Nations  "  and  Physiocratic 
ideas — Smith's  criticism  of  the  Physiocrats — His  failure  to  ap- 
preciate the  single  tax — His  prudence 160 


CONTENTS  OF  BOOK  II.  109 

CHAPTER  VI. 
SMITH'S  INFLUENCE   ON  POLITICAL  ECONOMY. 

SHOWING  WHAT  THE  "  WEALTH  OF  NATIONS"  ACCOMPLISHED 
AND  THE  COURSE  OF  THE  SUBSEQUENT  DEVELOPMENT  OF  PO- 
LITICAL ECONOMY. 

PAGE 

Smith,  a  philosopher,  who  addressed  the  cultured,  and  whose  at- 
tack on  mercantilism  rather  found  favor  with  the  powerful  land- 
owners— Not  entirely  exempt  from  suspicion  of  radicalism,  yet 
pardoned  for  his  affiliation  with  the  Physiocrats — Efforts  of 
Malthus  and  Ricardo  on  respectabilizing  the  science — The  fight 
against  the  corn-laws  revealed  the  true  beneficiaries  of  protec- 
tion, but  passed  for  a  free-trade  victory,  and  much  strength- 
ened the  incoherent  science — Confidence  of  its  scholastic  ad- 
vocates— Say's  belief  in  the  result  of  the  colleges  taking  up 
political  economy — Torrens's  confidence — Failure  of  other 
countries  to  follow  England's  example — Cairn es  doubts  the 
effect  of  making  it  a  scholastic  study — His  sagacity  proved 
by  the  subsequent  breakdown  of  Smith's  economy — The  true 
reason 170 

CHAPTER  VII. 

INEFFECTUAL  GROPINGS  TOWARD  A  DETERMINATION 
OF   WEALTH. 

SHOWING  THE  OPPOSITION  TO  THE  SCHOLASTIC  ECONOMY 
BEFORE  "PROGRESS  AND  POVERTY." 

Illogical  character  of  the  "Wealth  of  Nations" — Statements  of 
natural  right — Spence,  Ogilvie,  Chalmers,  Wakefield,  Spencer, 
Dove,  Bisset — Vague  recognitions  of  natural  right — Protec- 
tion gave  rise  to  no  political  economy  in  England,  but  did  else- 
where— Germany  and  protectionist  political  economy  in  the 
United  States — Divergence  of  the  schools — Trade-unionism 
in  socialism  ....  .  182 


CHAPTER  VIII. 
BREAKDOWN  OF  SCHOLASTIC  POLITICAL  ECONOMY. 

SHOWING  THE  REASON,  THE  RECEPTION,  AND  EFFECT  ON  PO- 
LITICAL ECONOMY  OF  "  PROGRESS  AND  POVERTY." 

"Progress  and  Poverty" — Preference  of  professors  to  abandon 
the  "  science  "  rather  than  radically  change  it,  brings  the  break- 
down of  scholastic  economy— The  "Encyclopaedia Britannica" 
—The  "Austrian  school"  that  has  succeeded  the  "classical"  200 


110  CONTENTS  OF  BOOK  II. 

CHAPTER  IX. 
WEALTH  AND  VALUE. 

SHOWING  THE  REASON  FOR  CONSIDERING  THE  NATURE  OF 
VALUE  BEFORE  THAT   OF  WEALTH. 

PAGE 

The  point  of  agreement  as  to  wealth — Advantages  of  proceeding 
from  this  point 210 

CHAPTER  X. 
VALUE  IN  USE  AND  VALUE  IN  EXCHANGE. 

SHOWING  THE  TWO  SENSES  OF  VALUE ;  HOW  THE  DISTINCTION 
HAS  BEEN  IGNORED,  AND  ITS  REAL  VALIDITY  J  AND  THE  REASON 
FOR  CONFINING  THE  ECONOMIC  TERM  TO  ONE  SENSE. 

Importance  of  the  term  value — Original  meaning  of  the  word — 
Its  two  senses— Names  for  them  adopted  by  Smith— Utility 
and  desirability — Mill's  criticism  of  Smith — Complete  ignor- 
ing of  the  distinction  by  the  Austrian  school— Cause  of  this 
confusion — Capability  of  use  not  usefulness — Smith's  distinc- 
tion a  real  one — The  dual  use  of  one  word  in  common  speech 
must  be  avoided  in  political  economy — Intrinsic  value  .  .  212 

CHAPTER  XI. 

ECONOMIC  VALUE— ITS  REAL  MEANING  AND  FINAL 
MEASURE. 

SHOWING  HOW  VALUE  IN  EXCHANGE  HAS  BEEN  DEEMED  A  RELATION 
OF  PROPORTION  |  AND  THE  AMBIGUITY  WHICH  HAS  LED  TO  THIS. 

The  conception  of  value  as  a  relation  of  proportion — It  is  really 
a  relation  to  exertion — Adam  Smith's  perception  of  this — His 
reasons  for  accepting  the  term  value  in  exchange — His  con- 
fusion and  that  of  his  successors 226 

CHAPTER  XII. 
VALUE  IN  EXCHANGE  REALLY  RELATED  TO  LABOR. 

SHOWING  THAT  VALUE  DOES  NOT  COME  FROM  EXCHANGEABILITY, 
BUT  EXCHANGEABILITY  FROM  VALUE,  WHICH  IS  AN  EXPRESSION 
OF  THE  SAVING  OF  LABOR  INVOLVED  IN  POSSESSION. 

Root  of  the  assumption  that  the  sum  of  values  cannot  increase 
or  diminish — The  fundamental  idea  of  proportion — We  can- 
not really  think  of  value  in  this  way — The  confusion  that 
makes  us  imagine  that  we  do — The  tacit  assumption  and  re- 
luctance to  examine  that  bolster  the  current  notion — Imagina- 
tive experiment  shows  that  value  is  related  to  labor— Common 


CONTENTS  OF  BOOK  II.  Ill 

PAGE 

facts  that  prove  this-y-Current  assumption  a  fallacy  of  undis- 
tributed middle— Various  senses  of  "  labor  " — Exertion  positive 
and  exertion  negative — Ke-statement  of  the  proposition  as  to 
value — Of  desire  and  its  measurement— Causal  relationship  of 
value  and  exchangeability — Imaginative  experiment  showing 
that  value  may  exist  where  exchange  is  impossible — Value  and 
expression  of  exertion  avoided 235 

CHAPTER  XIII. 
THE  DENOMINATOR  OF  VALUE. 

SHOWING  WHAT  VALUE  IS,  AND  ITS  RELATIONS. 

What  value  is — The  test  of  real  value — Value  related  only  to 
human  desire — This  perception  at  the  bottom  of  the  Austrian 
school — But  its  measure  must  be  objective — How  cost  of 
production  acts  as  a  measure  of  value — Desire  for  similar 
things  and  for  essential  things — Application  of  this  principle — 
Its  relation  to  land  values 250 


CHAPTER  XIV. 
THE  TWO  SOURCES  OF  VALUE. 

SHOWING  THAT  THERE  IS  A  VALUE  FROM  PRODUCTION  AND 
ALSO  A  VALUE  FROM  OBLIGATION. 

Value  does  not  involve  increase  of  wealth — Value  of  obligation 
— Of  enslavement — Economic  definition  of  wealth  impossible 
without  recognition  of  this  difference  in  value — Smith's  con- 
fusion and  results— Necessity  of  the  distinction — Value  from 
production  and  value  from  obligation — Either  gives  the  essen- 
tial quality  of  commanding  exertion — The  obligation  of  debt — 
Other  obligations — Land  values  most  important  of  all  forms 
of  value  from  obligation — Property  in  land  equivalent  to 
property  in  men— Common  meaning  of  value  in  exchange — 
Real  relation  with  exertion — Ultimate  exchangeability  is  for 
labor — Adam  Smith  right — Light  thrown  by  this  theory  of 
value 257 

CHAPTER  XV. 
THE  MEANING  OF  WEALTH  IN  POLITICAL  ECONOMY. 

SHOWING  HOW  VALUE  FROM  PRODUCTION  IS  WEALTH  IN 
POLITICAL  ECONOMY. 

Wealth  as  fixed  in  "Progress  and  Poverty" — Course  of  the 
scholastic  political  economy — The  reverse  method  of  this  work 
— The  conclusion  the  same — Reason  of  the  disposition  to  in- 
clude all  value  as  wealth — Metaphorical  meanings — Bull  and 
pun — Metaphorical  meaning  of  wealth — Its  core  meaning— Its 


112  CONTENTS   OF  BOOK  II. 

PAGE 

use  to  express  exchangeability— Similar  use  of  money — Ordi- 
nary core  meaning  the  proper  meaning  of  wealth — Its  use  in 
individual  economy  and  in  political  economy — What  is  meant 
by  increase  of  wealth — Wealth  and  labor — Its  factors  nature 
and  man — Wealth  their  resultant — Of  Adam  Smith — Danger 
of  carrying  into  political  economy  a  meaning  proper  in  indi- 
vidual economy — Example  of  "  money  "—  "  Actual  wealth  "  and 
''relative  wealth" — " Value  from  production"  and  "value 
from  obligation  " — The  English  tongue  has  no  single  word  for 
an  article  of  wealth — Of  "commodities" — Of  "goods" — Why 
there  is  no  singular  in  English — The  attempt  to  form  one  by 
dropping  the  "  s  "  and  Anglo-German  jargon  ....  270 

CHAPTER  XVI. 
THE  GENESIS  OF  WEALTH. 

SHOWING  HOW   WEALTH   ORIGINATES   AND  WHAT   IT   ESSEN- 
TIALLY IS. 

Reason  of  this  inquiry — Wealth  proceeds  from  exertion  prompted 
by  desire,  but  all  exertion  does  not  result  in  wealth — Simple 
examples  of  action,  and  of  action  resulting  in  wealth — "Rid- 
ing and  tying  "—Sub-divisions  of  effort  resulting  in  increments 
of  wealth — Wealth  essentially  a  stored  and  transferable  ser- 
vice—Of transferable  service— The  action  of  reason  as  natural, 
though  not  as  certain  and  quick  as  that  of  instinct — Wealth 
is  service  impressed  on  matter — Must  be  objective  and  have 
tangible  form 285 

CHAPTER  XVH. 
THE  WEALTH  THAT  IS  CALLED  CAPITAL. 

SHOWING  WHAT  THE  WEALTH  CALLED   CAPITAL  REALLY  IS. 

Capital  is  a  part  of  wealth  used  indirectly  to  satisfy  desire — 
Simple  illustration  of  fruit — Wealth  permits  storage  of  labor — 
The  bull  and  the  man — Exertion  and  its  higher  powers — Per- 
sonal qualities  cannot  really  be  wealth  or  capital — The  taboo 
and  its  modern  form — Common  opinion  of  wealth  and  capital  293 

CHAPTER  XVIII. 
WHY  POLITICAL  ECONOMY  CONSIDERS  ONLY  WEALTH. 

SHOWING  THAT  POLITICAL  ECONOMY,  AS  PROPERLY  STATED, 
COVERS  ALL  THE  RELATIONS  OF  MEN  IN  SOCIETY  INTO  WHICH 
IT  IS  NECESSARY  TO  INQUIRE. 

Political  economy  does  not  include  all  the  exertions  for  the 
satisfaction  of  material  desires ;  but  it  does  include  the  greater 
part  of  them,  and  it  is  through  value  that  the  exchange  of 
services  for  services  is  made — Its  duty  and  province  .  .  301 


CONTENTS  OF  BOOK  II.  113 

CHAPTER  XIX. 
MORAL  CONFUSIONS  AS  TO  WEALTH. 

SHOWING  HOW  RICH  AND   POOR  ARE  CORRELATIVES,   AND 
WHY  CHRIST   SYMPATHIZED   WITH  THE   POOR. 

PAGE 

The  legitimacy  of  wealth  and  the  disposition  to  regard  it  as 
sordid  and  mean — The  really  rich  and  the  really  poor — They 
are  really  correlatives — The  good  sense  of  Christ's  teaching  .  304 

CHAPTER  XX. 
OF  THE  PERMANENCE  OF  WEALTH. 

SHOWING  THAT  VALUES  FROM  OBLIGATION  SEEM  REALLY  TO 
LAST  LONGER  THAN  VALUES  FROM  PRODUCTION. 

Value  from  production  and  value  from  obligation — The  one 
material  and  the  other  existing  in  the  spiritual — Superior 
permanence  of  the  spiritual — Shakespeare's  boast — Maecenas's 
buildings  and  Horace's  odes — The  two  values  now  existing — 
Franchises  and  land  values  last  longer  than  gold  and  gems — 
Destruction  in  social  advance — Conclusions  from  all  this  .  308 

CHAPTER  XXI. 
THE  RELATION  OF  MONEY  TO  WEALTH. 

SHOWING  THAT  SOME  MONEY  IS  AND  SOME  MONEY  IS  NOT 
WEALTH. 

Where  I  shall  treat  of  money — No  categorical  answer  can  yet 
be  given  to  the  question  whether  money  is  wealth — Some 
money  is  and  some  is  not  wealth 313 


INTRODUCTION  TO  BOOK  II. 

SINCE  political  economy  is  the  science  which  treats  of 
the  nature  of  wealth  and  the  laws  of  its  production 
and  distribution,  our  first  step  is  to  fix  the  meaning  that 
in  this  science  properly  attaches  to  its  primary  term. 

I  shall  in  the  first  place  show  the  need  for  an  exhaustive 
inquiry,  by  showing  the  confusion  that  from  the  time  of 
Adam  Smith  has  attached  to  this  term,  and  the  utter 
incoherency  with  regard  to  it  into  which  the  scholastic 
economy  has  now  fallen. 

I  shall  next  try  to  ascertain  the  causes  of  this  confusion. 
This  will  lead  to  a  consideration  of  economic  development, 
and  in  the  absence  in  our  literature  of  any  intelligent  his- 
tory of  political  economy,  I  shall  attempt  briefly  to  trace 
its  course,  from  the  time  of  Adam  Smith  and  his  prede- 
cessors, the  French  economists  called  Physiocrats,  to  its 
virtual  abandonment  in  the  teachings  of  the  English  and 
American  colleges  and  universities  at  the  present  time. 

Having  seen  that  the  only  point  as  to  wealth  on  which 
the  scholastic  economists  now  agree  is  that  it  has  value, 
and  that  their  confusions  as  to  wealth  proceed  largely  from 
confusions  as  to  value,  I  shall  then  try  to  determine  the 
proper  meaning  of  the  term  value.  That  fixed,  we  shall 
be  in  a  position  to  fix  the  real  meaning  and  relations  of  the 
term  wealth,  and  shall  proceed  to  do  so. 

Although  in  this  book  it  will  be  seen  that  I  am  giving 
many  chapters  to  a  subject  which  preceding  systematic 

115 


116  THE   NATURE  OF  WEALTH.  Book  IL 

writers  have  passed  over  in  a  few  lines,  even  where,  as  is 
the  case  with  many  of  them,  they  have  not  utterly  ignored 
it,  I  am  sure  that  the  reader  will  ultimately  find  in  the  ease 
and  certainty  with  which  subsequent  inquiries  may  be 
conducted  an  ample  reward  for  the  care  thus  taken  in  the 
beginning. 


CHAPTER  I. 
CONFUSIONS  AS  TO  THE  MEANING  OF  WEALTH. 

SHOWING  THE  FAILURE  OF  THE  CURRENT  POLITICAL  ECON- 
OMY TO  DEFINE  WEALTH,  AND  THE  CONFUSIONS  THERE- 
FROM, CULMINATING  IN  THE  ABANDONMENT  OF  POLITICAL 
ECONOMY  BY  ITS  PROFESSED  TEACHERS. 

Wealth  the  primary  term  of  political  economy — Common  use  of 
the  word— Vagueness  more  obvious  in  political  economy — Adam 
Smith  not  explicit— Increasing  confusion  of  subsequent  writers — 
Their  definitions — Many  make  no  attempt  at  definition — Perry's 
proposition  to  abandon  the  term— Marshall  and  Nicholson— Fail- 
ure to  define  the  term  leads  to  the  abandonment  of  political  econ- 
omy—This concealed  under  the  word  "economic" — The  intent 
expressed  by  Macleod — Results  to  political  economy. 

FT1HE  purpose  of  the  science  of  political  economy  is,  as 
JL  we  have  seen,  the  investigation  of  the  laws  that  gov- 
ern the  production  and  distribution  of  wealth  in  social  or 
civilized  life.  In  beginning  its  study,  our  first  step  is 
therefore  to  see  what  is  the  nature  of  the  wealth  of  socie- 
ties or  communities ;  to  determine  exactly  what  we  mean 
by  the  word  wealth  when  used  as  a  term  of  political 
economy. 

There  are  few  words  in  more  common  use  than  this 
word  wealth,  and  in  the  general  way  that  suffices  for 
ordinary  purposes  we  all  know  what  we  mean  by  it.  But 
when  it  comes  to  denning  that  meaning  with  the  precision 

117 


118  THE  NATURE  OF  WEALTH.  Boole  II. 

necessary  for  the  purposes  of  political  economy,  so  as  to 
determine  what  is  and  what  is  not  properly  included  in  the 
idea  of  wealth  as  political  economy  must  treat  of  it,  most 
of  us,  though  we  often  and  easily  use  the  word  in  ordinary 
thought  and  speech,  are  apt  to  become  conscious  of  indefi- 
niteness  arid  perplexity. 

This  is  not  strange.  Indeed,  it  is  a  natural  result  of  the 
transference  to  a  wider  economy  of  a  term  we  are  accus- 
tomed to  use  in  a  narrower  economy.  In  our  ordinary 
thought  and  speech,  referring,  as  it  most  frequently  does, 
to  every-day  affairs  and  the  relations  of  individuals  with 
other  individuals,  the  economy  with  which  we  are  usually 
concerned  and  have  most  frequently  in  mind  is  individual 
economy,  not  political  economy— the  economy  whose 
standpoint  is  that  of  the  unit,  not  the  economy  whose 
standpoint  is  that  of  the  social  whole  or  social  organism  j 
the  Greater  Leviathan  of  natural  origin  of  which  I  have 
before  spoken. 

The  original  meaning  of  the  word  wealth  is  that  of 
plenty  or  abundance ;  that  of  the  possession  of  things  con- 
ducive to  a  certain  kind  of  weal  or  well-being.  Health, 
strength  and  wealth  express  three  kinds  of  weal  or  well- 
being.  Health  relates  to  the  constitution  or  structure,  and 
expresses  the  idea  of  well-being  with  regard  to  the  physi- 
cal or  mental  frame.  Strength  relates  to  the  vigor  of  the 
natural  powers,  and  expresses  the  idea  of  well-being  with 
regard  to  the  ability  of  exertion.  Wealth  relates  to  the 
command  of  external  things  that  gratify  desire,  and  ex- 
presses the  idea  of  well-being  with  regard  to  possessions 
or  property.  Now,  as  social  health  must  mean  something 
different  from  individual  health,  and  social  strength  some- 
thing different  from  individual  strength ;  so  social  wealth, 
or  the  wealth  of  the  society,  the  larger  man  or  Greater 
Leviathan  of  which  individuals  living  in  civilization  are 


Chap.  I.  CONFUSIONS   AS  TO  MEANING.  119 

components,  must  be  something  different  from  the  wealth 
of  the  individual. 

In  the  one  economy,  that  of  individuals  or  social  units, 
everything  is  regarded  as  wealth  the  possession  of  which 
tends  to  give  wealthiness,  or  the  command  of  external 
things  that  satisfy  desire,  to  its  individual  possessor,  even 
though  it  may  involve  the  taking  of  such  things  from 
other  individuals.  But  in  the  other  economy,  that  of 
social  wholes,  or  the  social  organism,  nothing  can  be  re- 
garded as  wealth  that  does  not  add  to  the  wealthiness  of 
the  whole.  What,  therefore,  may  be  regarded  as  wealth 
from  the  individual  standpoint,  may  not  be  wealth  from 
the  standpoint  of  the  society.  An  individual,  for  instance, 
may  be  wealthy  by  virtue  of  obligations  due  to  him  from 
other  individuals ;  but  such  obligations  can  constitute  no 
part  of  the  wealth  of  the  society,  which  includes  both 
debtor  and  creditor.  Or,  an  individual  may  increase  his 
wealth  by  robbery  or  by  gaming;  but -the  wealth  of  the 
social  whole,  which  comprises  robbed  as  well  as  robber, 
loser  as  well  as  winner,  cannot  be  thus  increased. 

It  is  therefore  no  wonder  that  men  accustomed  to  the 
use  of  the  word  wealth  in  its  ordinary  sense,  a  sense  in 
which  no  one  can  avoid  its  continual  use,  should  be  liable, 
unless  they  take  great  care,  to  slip  into  confusion  when 
they  come  to  use  the  same  word  in  its  economic  sense. 
But  what  does  seem  strange  is  that  indefiniteness,  per- 
plexity and  confusion  as  to  the  meaning  of  the  economic 
term  wealth,  are  even  more  obvious  in  the  writings  of 
the  professional  economists  who  are  accredited  by  colleges 
and  universities  and  other  institutions  of  learning  with 
the  possession  of  special  knowledge  which  authorizes  them 
to  instruct  their  fellows  on  economic  subjects.  While  as 
for  the  professional  statisticians  who  in  long  arrays  of 
figures  attempt  to  estimate  the  aggregate  wealth  of  states 


120  THE  NATURE  OF  WEALTH.  Book  II. 

and  nations,  they  seem  for  the  most  part  innocent  of  any 
suspicion  that  what  may  be  wealth  to  an  individual  may 
not  be  wealth  to  a  community.* 

Adam  Smith,  who  is  regarded  as  the  founder  of  the 
modern  science  of  political  economy,  is  not  very  definite 
or  entirely  consistent  as  to  the  real  nature  of  the  wealth 
of  nations,  or  wealth  in  the  economic  sense.  But  since 
his  time  the  confusions  of  which  he  shows  traces,  instead 
of  being  cleared  up  by  the  writings  of  those  who  in  our 
schools  and  colleges  are  recognized  as  political  economists,! 
has  become  progressively  so  much  worse  confounded  that 
in  the  latest  and  most  elaborate  of  these  treatises  all  at- 
tempts to  define  the  term  seem  to  have  been  abandoned. 

In  " Progress  and  Poverty"  (1879),  I  showed  the  utter 
confusion  as  to  wealth  into  which  the  scholastic  political 
economy  had  fallen,  by  printing  together  a  number  of 
varying  and  contradictory  definitions  of  its  sub-term  cap- 
ital, as  given  by  accredited  economic  writers.^:  Although 
I  was  then  obliged  to  fix  the  meaning  of  the  main  term 
wealth  in  order  to  fix  the  meaning  of  the  sub-term 

*  A  curious,  if  not  comical,  instance  of  the  loose  way  in  which  pro- 
fessed statisticians  jump  at  conclusions  is  afforded  in  the  controversy 
I  had  in  "Frank  Leslie's  Weekly"  (1883)  with  Professor  Francis  A. 
Walker,  then  superintendent  of  the  United  States  Census,  and  which 
was  afterwards  reprinted  as  an  appendix  to  the  American  edition  of 
my  "Social  Problems." 

t  "Progress  and  Poverty,"  although  it  has  already  exerted  a  wider 
influence  than  any  other  economic  work  written  since  the  "Wealth 
of  Nations,"  is  not  so  recognized,  not  being  even  alluded  to  in  the 
elaborate  history  of  political  economy  which,  on  account  of  the  utter 
chaos  into  which  the  teachings  of  that  science  have  fallen,  takes  in 
the  last  edition  of  the  "Encyclopaedia  Britannica"  the  place  before 
accorded  to  the  science  itself,  and  which  has  since  been  reprinted  in 
separate  form.  ("A  History  of  Political  Economy,"  by  John  Kells 
Ingram,  LL.D.,  Macmillan  &  Co.,  1888.) 

J  "Progress  and  Poverty,"  Book  I.,  Chapter  II.,  "The  Meaning  of 
the  Terms." 


Cliap.I.  CONFUSIONS  AS  TO  MEANING.  121 

capital,  with  which  I  was  immediately  concerned,  the 
confusion  among  the  accredited  economists  has  "  got  no 
better  very  fast/7  the  "  economic  revolution  "  which  has  in 
the  meanwhile  displaced  from  their  chairs  the  professors 
of  the  then  orthodox  political  economy  in  order  to  give 
place  to  so-called  "Austrians,"  or  similar  professors  of 
"  economics/'  having  only  made  confusion  worse  con- 
founded. Let  me,  therefore,  in  order  to  show  in  the  most 
up-to-date  way  the  confusion  existing  among  scholastic 
economists  as  to  the  primary  term  of  political  economy, 
put  together  what  definitions  of  the  economic  term 
wealth  I  can  find  in  the  works  of  representative  and 
accredited  economic  writers  since  Adam  Smith  to  the 
present  time,  placing  them  in  chronological  order  as  far 
as  possible : 

J.  B.  Say— Divides  wealth  into  natural  and  social,  and 
applies  the  latter  term  to  whatever  is  susceptible  of  ex- 
change. 

Mai  thus— Those  material  objects  which  are  necessary, 
useful  or  agreeable  to  man. 

Torrens— Articles  which  possess  utility  and  are  produced 
by  some  portion  of  voluntary  effort. 

McCulloch— Those  articles  or  products  which  have  ex- 
changeable value,  and  are  either  necessary,  useful  or 
agreeable  to  man. 

Jones— Material  objects  voluntarily  appropriated  by 
man. 

Rae— All  I  can  find  on  this  subject  in  his  "  New  Princi- 
ples of  Political  Economy"  (1833)  is  that  "individuals 
grow  rich  by  the  acquisition  of  wealth  previously  existing ; 
nations  by  the  creation  of  wealth  that  did  not  before 
exist." 

Senior— All  those  things,  and  those  things  only,  which 
are  transferable,  are  limited  in  supply,  and  are  directly  or 
indirectly  productive  of  pleasure  or  preventive  of  pain.  .  .  . 


122  THE  NATURE  OF  WEALTH.  Book  IL 

Health,  strength  and  knowledge,  and  the  other  acquired 
powers  of  body  and  mind,  appear  to  us  to  be  articles  of 
wealth. 

Vethake— All  objects,  immaterial  as  well  as  material, 
having  utility,  excepting  those  not  susceptible  of  being 
appropriated,  and  those  supplied  gratuitously  by  nature. 
By  the  wealth  of  a  community  or  nation  is  meant  all  the 
wealth  which  is  possessed  by  the  persons  composing  it, 
either  in  their  individual  or  corporate  capacities. 

John  Stuart  Mill— All  useful  and  agreeable  things  which 
possess  exchangeable  value  j  or  in  other  words,  all  useful 
and  agreeable  things  except  those  which  can  be  obtained, 
in  the  quantity  desired,  without  labor  or  sacrifice. 

Fawcett— Wealth  may  be  defined  to  consist  of  every 
commodity  which  has  an  exchangeable  value. 

Bowen— The  aggregate  of  all  things,  whether  material 
or  immaterial,  which  contribute  to  comfort  and  enjoyment 
and  which  are  objects  of  frequent  barter  and  sale. 

Jevons— What  is  (1)  transferable,  (2)  limited  in  supply, 
(3)  useful. 

Mason  and  Lalor,  1875— Anything  for  which  something 
can  be  got  in  exchange. 

Leverson— The  necessaries  and  comforts  of  life  produced 
by  labor. 

Shadwell— All  articles  the  possession  of  which  affords 
pleasure  to  anybody. 

Macleod— Anything  whatever  that  can  be  bought,  sold 
or  exchanged,  or  whose  value  can  be  measured  in  money. 
.  .  .  Wealth  is  nothing  but  exchangeable  rights. 

De  Laveleye— Everything  which  answers  to  men's  ra- 
tional wants.  A  useful  service  and  a  useful  object  are 
equally  wealth.  .  .  .  Wealth  is  what  is  good  and  useful— 
a  good  climate,  well-kept  roads,  seas  teeming  with  fish,  are 
unquestionably  wealth  to  a  country,  and  yet  they  cannot 
be  bought. 


Chap.L  CONFUSIONS  AS  TO  MEANING. 

Francis  A.  Walker— All  articles  of  value  and  nothing 
else. 

Macvane— All  the  useful  and  agreeable  material  objects 
we  own  or  have  the  right  to  use  and  enjoy  without  asking 
the  consent  of  any  other  person.  Wealth  is  of  two  gen- 
eral kinds— natural  wealth  and  wealth  produced  by  labor. 

Clark— Usage  has  employed  the  word  wealth  to  sig- 
nify, first,  the  comparative  welfare  resulting  from  material 
possessions,  and  secondly,  and  by  a  transfer,  the  posses- 
sions themselves.  Wealth  then  consists  in  the  relative- 
weal-constituting  elements  in  man's  material  environment. 
It  is  objective  to  the  user,  material,  useful  and  appropri- 
able. 

Laughlin— Defines  material  wealth  as  something  which 
satisfies  a  want ;  cannot  be  obtained  without  some  sacrifice 
of  exertion,  and  is  transferable ;  but  also  speaks  of  imma- 
terial wealth  without  defining  it. 

Newcomb— That  for  the  enjoyment  of  which  people  pay 
money.  The  skill,  business  ability  or  knowledge  which 
enables  their  possessors  to  contribute  to  the  enjoyment  of 
others,  including  the  talents  of  the  actor,  the  ability  of  the 
man  of  business,  the  knowledge  of  the  lawyer  and  the  skill 
of  the  physician,  is  to  be  considered  wealth  when  we  use 
the  term  in  its  most  extended  sense. 

Bain— A  commodity  is  material  worked  up  after  a  de- 
sign to  answer  to  a  definite  demand  or  need,  and  wealth  is 
simply  the  sum  total  of  commodities. 

Ruskin— This  brilliant  essayist  and  art  critic  can  hardly 
be  classed  as  a  scholastically  accepted  political  economist, 
and  I  have  refrained  from  giving  his  definition  of  wealth 
in  what  otherwise  would  have  been  its  proper  place.  But 
his  "Unto  this  Last"  (1866)  consists  of  four  essays  on 
political  economy,  and  the  brilliant  flashes  of  ethical  truth 
which  they  like  his  other  works  contain  have  led  many 
admirers  to  regard  him  as  a  profound  economist.  He  is 


OF  -raw 
UNIVERSITY 


124  THE  NATURE  OF  WEALTH.  Boole  II. 

anything  but  complimentary  to  the  "modern  soi-disant 
science/7  as  he  calls  it,  against  which  he  brings  the  charge 
that  while  claiming  to  be  the  science  of  wealth  it  cannot 
tell  what  wealth  is.  In  the  preface  to  these  essays  he  says : 
"  The  real  gist  of  these  papers,  their  central  meaning  and 
aim  is  to  give,  as  I  believe,  for  the  first  time  in  plain 
English,  a  logical  definition  of  wealth;  such  definition 
being  absolutely  needed  for  a  basis  of  economical  science." 
It  would  be  well,  therefore,  without  assuming  that  Ruskin 
in  any  way  represents  the  scholastic  political  economy, 
which  he  likened  to  an  astronom}^  unable  to  say  what  a 
star  was,  to  give  his  definition.  That  definition,  to  use 
his  own  words  is— "The  possession  of  useful  articles  that 
we  can  use,"  or  as  again  stated  somewhat  later  on,  "  The 
possession  of  the  valuable  by  the  valiant." 

The  endeavor  to  get  together  these  definitions  of  wealth 
by  economic  writers  has  involved  considerable  effort,  but 
it  is  likely  to  be  noticeable  by  its  omissions.  The  fact  is, 
that  many  of  the  best-known  writers  on  political  economy, 
such  for  instance  as  Ricardo,  Chalmers,  Thorold  Rogers 
and  Cairnes,  make  no  attempt  to  give  any  definition  of 
wealth.  The  same  thing  is  to  be  said  of  the  two  volumes 
of  Karl  Marx  entitled  " Capital;"  and  also  of  the  two  vol- 
umes on  the  same  subject  by  Bohm-Bawerk,  which  also 
have  been  translated  into  English,  and  are  much  quoted 
by  that  now  dominant  school  of  scholastic  political  econ- 
omy known  as  the  "Austrian."  And  while  many  of  the 
writers  who  make  no  attempt  to  define  wealth,  do  have  a 
good  deal  to  say  about  it,  what  fhey  say  is  too  diffused 
and  incoherent  either  to  quote  or  condense.  There  are 
many  who  without  saying  so,  evidently  hold  the  opinion 
thus  frankly  expressed  by  Professor  Perry  in  his  "  Ele- 
ments of  Political  Economy"  (1866) : 

This  word  wealth  has  been  the  bane  of  political  economy.  It  is 
the  bog  whence  most  of  the  mists  have  arisen  which  have  beclouded 


Chap.  I.  CONFUSIONS  AS  TO  MEANING.  125 

the  whole  subject.  From  its  indefiniteness  and  the  variety  of  asso- 
ciations it  carries  along  with  it  in  different  minds,  it  is  totally  unfit 
for  any  scientific  purpose  whatever.  It  is  itself  almost  impossible 
to  be  defined,  and  consequently  can  serve  no  useful  purpose  in  a 
definition  of  anything  else.  .  .  .  The  meaning  of  the  word  wealth 
has  never  yet  been  settled ;  and  if  political  economy  must  wait  until 
that  work  be  done  as  a  preliminary,  the  science  will  never  be  satis- 
factorily constructed.  .  .  .  Men  may  think,  and  talk,  and  write,  and 
dispute  till  doomsday,  but  until  they  come  to  use  words  with  defi- 
niteness,  and  mean  the  same  thing  by  the  same  word,  they  reach  com- 
paratively few  results  and  make  but  little  progress.  And  it  is  just 
at  this  point  that  we  find  the  first  grand  reason  of  the  slow  advance 
hitherto  made  by  this  science.  It  undertook  to  use  a  word  for  scien- 
tific purposes  which  no  amount  of  manipulation  and  explanation  could 
make  suitable  for  that  service.  Happily  there  is  no  need  to  use  this 
word.  In  emancipating  itself  from  the  word  wealth  as  a  technical 
term,  political  economy  has  dropped  a  clog,  and  its  movements  are 
now  relatively  free. 

To  make  this  exhibition  of  definitions  as  fairly  repre- 
sentative as  possible  I  have  wished  to  include  in  it  that  of 
Professor  Alfred  Marshall,  Professor  of  Political  Economy 
in  the  University  of  Cambridge,  England,  whose  "  Princi- 
ples of  Economics  "  (of  which  only  the  first  volume,  issued 
in  1890,  and  containing  some  800  octavo  pages,  has  yet 
been  published)  may  be  considered  the  latest  and  largest, 
and  scholastically  the  most  highly  indorsed,  economic  work 
yet  published  in  English. 

It  cannot  be  said  of  him,  as  of  many  economic  writers, 
that  he  does  not  attempt  to  say  what  is  meant  by  wealth, 
for  if  one  turns  to  the  index  he  is  directed  to  a  whole 
chapter.  But  neither  in  this  chapter  nor  elsewhere  can  I 
find  any  paragraph,  however  long,  that  may  be  quoted  as 
defining  the  meaning  he  attaches  to  the  term  wealth.  The 
only  approach  to  it  is  this : 

All  wealth  consists  of  things  that  satisfy  wants,  directly  or  indi- 
rectly. All  wealth  therefore  consists  of  goods  j  but  not  all  kinds  of 
goods  are  reckoned  as  wealth. 


126  THE  NATURE  OF  WEALTH.  Book  II. 

But  for  the  distinction  between  goods  reckoned  as 
wealth  and  goods  not  reckoned  as  wealth,  which  one  would 
think  was  about  to  follow,  the  reader  looks  in  vain.  He 
merely  finds  that  Professor  Marshall  gives  him  the  choice 
of  classifying  goods  into  external-material-transferable 
goods,  external-material-non-transferable  goods,  external- 
personal-transferable  goods,  external-personal-non-trans- 
ferable goods,  and  internal-personal-non-transferable 
goods;  or  else  into  material-external-transferable  goods, 
material-external-non-transferable  goods,  personal-exter- 
nal-transferable goods,  personal-external-non-transferable 
goods,  and  personal-internal-non-transferable  goods.  But 
as  to  which  of  these  kinds  of  goods  are  reckoned  as  wealth 
and  which  are  not,  Professor  Marshall  gives  the  reader  no 
inkling,  unless,  indeed,  he  may  be  able  to  find  it  in  Wag- 
ner's "  Volkswirthschaf tslehre,"  to  which  the  reader  is  re- 
ferred at  the  conclusion  of  the  chapter  as  throwing  "  much 
light  upon  the  connection  between  the  economic  concept 
of  wealth  and  the  juridical  concept  of  rights  in  private 
property."  I  can  convey  the  impression  produced  on  my 
mind  by  repeated  struggles  to  discover  what  the  Professor 
of  Political  Economy  in  the  great  English  University  of 
Cambridge  holds  is  to  be  reckoned  as  wealth,  only  by  say- 
ing that  it  seems  to  comprise  all  things  in  the  heavens 
above,  the  earth  beneath  and  the  waters  under  the  earth, 
that  may  be  useful  to  or  desired  by  man,  individually  or 
collectively,  including  man  himself  with  all  his  natural  or 
acquired  capabilities,  and  that  all  I  can  absolutely  affirm, 
for  it  is  the  only  thing  for  which  I  can  find  a  direct  state- 
ment, is,  that  "  we  ought  for  many  purposes  to  reckon  the 
Thames  a  part  of  England's  wealth." 

The  same  utter,  though  perhaps  somewhat  less  elaborate, 
incoherency  is  shown  by  Professor  J.  Shield  Nicholson, 
Professor  of  Political  Economy  in  the  great  Scottish 
University  of  Edinburgh,  whose  "  Principles  of  Political 


Chap.  I.  CONFUSIONS  AS  TO  MEANING,  127 

Economy  "  appeared  in  first  volume  (less  than  half  as  big 
as  that  of  Professor  Marshall's)  in  1893,  and  has  not  yet 
(1897)  been  succeeded  by  another.  Looking  up  the  index 
for  the  word  "  wealth  "  one  finds  no  less  than  fifteen  refer- 
ences, of  which  the  first  is  "  popular  conception  of,"  and 
the  second  "  economic  conception  of."  Yet  in  none  of 
these,  nor  in  the  whole  volume,  though  one  wade  through 
it  all  in  the  search,  is  anything  like  a  definition  of  wealth  to 
be  found,  the  only  thing  resembling  a  direct  statement 
being  the  incidental  remark  (p.  404)  that  "land  is  in 
general  the  most  important  item  in  the  inventory  of  na- 
tional wealth"— a  proposition  which  logically  is  as  untrue 
as  that  we  ought  to  reckon  the  Thames  a  part  of  England's 
wealth.  . 

Now,  wealth  is  the  object-noun,  or  name  given  to  the 
subject-matter,  of  political  economy,  the  science  that  seeks 
to  discover  the  laws  of  the  production  and  distribution  of 
wealth  in  human  society.  It  is  therefore  the  economic 
term  of  first  importance.  Unless  we  know  what  wealth 
is,  how  possibly  can  we  hope  to  discover  how  it  is  pro- 
cured and  distributed  ?  Yet  after  a  century  of  what  passes 
for  the  cultivation  of  this  science,  with  professors  of 
political  economy  in  every  college,  the  question,  "  What  is 
wealth  ? "  finds  at  their  hands  no  certain  answer.  Even  to 
such  questions  as,  "  Is  wealth  material  or  immaterial?"  or 
"  Is  it  something  external  to  man  or  does  it  include  man 
and  his  attributes  ? "  we  get  no  undisputed  reply.  There 
is  not  even  a  consensus  of  opinion.  And  in  the  latest  and 
most  pretentious  scholastic  teaching  the  attempt  to  obtain 
any  has  been  virtually,  where  not  definitely,  abandoned, 
and  the  economic  meaning  of  wealth  reduced  to  that  of 
anything  having  value  to  the  social  unit. 

It  is  clear  that  failure  to  define  its  subject-matter  or 
object-noun  must  be  fatal  to  any  attempted  science ;  for  it 
shows  lack  of  the  first  essential  of  true  science.  And  the 


128  THE  NATURE   OF  WEALTH.  Book  II. 

fate  of  rejection  even  by  those  who  profess  to  study  and 
teach  it  has  already  befallen  political  economy  at  the  hands 
of  the  accredited  institutions  of  learning. 

This  fact  will  not  be  obvious  to  the  ordinary  reader,  for 
it  is  concealed  to  him  under  a  change  in  the  meaning  of 
a  word. 

Since  the  term  comes  into  our  language  from  the  Greek, 
the  proper  word  for  expressing  the  idea  of  relationship  to 
political  economy  is  "  politico-economic."  But  this  is  a 
term  too  long,  and  too  alien  to  the  Saxon  genius  of  our 
mother  tongue,  for  frequent  repetition.  And  so  the  word 
"  economic  "  has  come  into  accepted  use  in  English,  as  ex- 
pressing that  idea.  We  are  justified  therefore,  in  suppos- 
ing, and  as  a  matter  of  fact  do  generally  suppose  when  we 
first  hear  of  them,  that  the  works  now  written  by  the  pro- 
fessors of  political  economy  in  our  universities  and  col- 
leges, and  entitled  "  Elements  of  Economics,"  "  Principles 
of  Economics,"  "  Manual  of  Economics,"  etc.,  are  treatises 
on  political  economy.  Examination,  however,  will  show 
that  many  of  these  at  least  are  not  in  reality  treatises  on 
the  science  of  political  economy,  but  treatises  on  what 
their  authors  might  better  call  the  science  of  exchanges, 
or  the  science  of  exchangeable  quantities.  This  is  not  the 
same  thing  as  political  economy,  but  quite  a  different  thing 
—a  science  in  short  akin  to  the  science  of  mathematics.* 
In  this  there  is  no  necessity  for  distinguishing  between 
what  is  wealth  to  the  unit  and  what  is  wealth  to  the  whole, 
and  moral  questions,  that  must  be  met  in  a  true  political 
economy,  may  be  easily  avoided  by  those  to  whom  they 
seem  awkward. 

A  proper  name  for  this  totally  different  science,  which 
the  professors  of  political  economy  in  so  many  of  the  lead- 

*  The  attempts  by  titular  professors  of  political  economy  to  find 
mathematical  expression  for  what  they  call  " economics"  must  be 
familiar  to  those  who  have  toiled  through  recent  scholastic  literature. 


Chap.  I.  CONFUSIONS  AS  TO  MEANING.  129 

ing  colleges  and  universities  on  both  sides  of  the  Atlantic 
have  now  substituted  in  their  teaching  for  the  science  they 
are  officially  supposed  to  expound,  would  be  that  of  "  cat- 
allactics,"  as  proposed  by  Archbishop  Whately,  or  that  of 
"plutology,"as  proposed  by  Professor  Hern,  of  Melbourne ; 
but  it  is  certainly  not  properly  "  economics/'  for  that  by 
long  usage  is  identified  with  political  economy. 

Both  the  reason  for,  and  what  is  meant  by,  the  change 
of  title  from  political  economy  to  economics,  which  is  so 
noticeable  in  the  writings  of  the  professors  of  political 
economy  in  recent  years,  are  thus  frankly  shown  by  Mac- 
leod  (Vol.  I.,  Chapter  VII.,  Sec.  11,  "  Science  of  Econom- 
ics ")  : 

We  do  not  propose  to  make  any  change  at  all  in  the  name  of  the 
science.  Both  the  terms  "Political  Economy"  and  "Economic  Sci- 
ence," or  "Economics,"  are  in  common  use,  and  it  seems  "better  to 
discontinue  that  name  which  is  liable  to  misinterpretation,  and  which 
seems  to  relate  to  politics,  and  to  adhere  to  that  one  which  most 
clearly  defines  its  nature  and  extent  and  is  most  analogous  to  the 
names  of  other  sciences.  We  shall,  therefore,  henceforth  discon- 
tinue the  use  of  the  term  "political  economy"  and  adhere  to  that  of 
"economics."  Economics,  then,  is  simply  the  science  of  exchanges, 
or  of  commerce  in  its  widest  extent  and  in  all  its  forms  and  varieties ; 
it  is  sometimes  called  the  science  of  wealth  or  the  theory  of  value. 
The  definition  of  the  science  which  we  offer  is : 

Economics  is  the  science  which  treats  of  the  laws  which  govern 
the  relations  of  exchangeable  quantities. 

Now  the  laws  which  govern  the  relations  of  exchange- 
able quantities  are  such  laws  as  2  +  2  —  4;  4  —  1  =  3; 
2x4  =  8;  4-i-2  =  2;  and  their  extensions. 

The  proper  place  for  such  laws  in  any  honest  classifica- 
tion of  the  sciences  is  as  laws  of  arithmetic  or  laws  of 
mathematics,  not  as  laws  of  economics.  And  the  attempt 
of  holders  of  chairs  of  political  economy  to  take  advantage 
of  the  usage  of  language  which  has  made  "  economic "  a 
short  word  for  "  politico-economic  "  to  pass  off  their  "  sci- 


130  THE  NATURE  OF   WEALTH.  Book  II. 

ence  of  economics"  as  if  it  were  the  science  of  political 
economy,  is  as  essentially  dishonest  as  the  device  of  the 
proverbial  Irishman  who  attempted  to  cheat  his  partners 
by  the  formula,  "  Here's  two  for  you  two,  and  here's  two 
for  me  too." 

To  this,  in  less  than  a  century  after  Say  congratulated 
his  readers  on  the  first  establishment  of  chairs  of  political 
economy  in  universities,  has  the  scholastic  political  econ- 
omy come. 

Professor  Perry,  writing  thirty  years  ago,  thought  that 
by  emancipating  itself  from  the  word  wealth  as  a  tech- 
nical term,  political  economy  would  drop  a  clog  and  its 
movements  would  become  relatively  free.  In  what  is  now 
taught  from  the  chairs  of  political  economy  in  our  leading 
colleges  on  both  sides  of  the  Atlantic  the  clog  has  indeed 
been  dropped,  with  results  which  very  strongly  suggest 
the  increased  freedom  of  movement  which  comes  from 
the  dropping  of  its  tail  by  a  boy's  kite.  Without  the  clog 
of  an  object-noun,  political  economy  as  there  taught  has 
plunged  out  of  existence,  and  the  science  of  values  which 
is  taught  in  its  place  has  no  answer  whatever  to  give  even 
to  questions  which  Professor  Perry  would  have  thought 
completely  settled  at  the  time  he  wrote. 


CHAPTER  II. 

CAUSES  OF  CONFUSION  AS  TO  THE  MEANING 
OF  WEALTH. 

SHOWING  THE  REAL  DIFFICULTY  THAT  BESETS  THE 
ECONOMIC  DEFINITION  OF  WEALTH. 

Effect  of  slavery  on  the  definition  of  wealth— Similar  influences  now 
existing— John  Stuart  Mill  on  prevalent  delusions — Genesis  of  the 
protective  absurdity — Power  of  special  interests  to  mold  common 
opinion— Of  injustice  and  absurdity,  and  the  power  of  special  in- 
terests to  pervert  reason— Mill  an  example  of  how  accepted  opin- 
ions may  blind  men — Effect  upon  a  philosophical  system  of  the 
acceptance  of  an  incongruity — Meaning  of  a  saying  of  Christ — 
Influence  of  a  class  profiting  by  robbery  shown  in  the  development 
of  political  economy— Archbishop  Whately  puts  the  cart  before 
the  horse— The  power  of  a  great  pecuniary  interest  to  affect 
thought  can  be  ended  only  by  abolishing  that  interest— This  shown 
in  American  slavery. 

THE  neglect  of  political  economy  in  the  classical  world 
has  been  explained  by  modern  economists  as  due  to 
the  effect  of  slavery  in  causing  labor  to  be  regarded  as 
degrading.* 

But  in  this  a  quicker  and  more  direct  effect  of  slavery 
in  preventing  the  cultivation  of  political  economy  has  been 
overlooked. 

*  See,  for  instance,  McCulloch's  "Principles  of  Political  Economy" 
(1825),  Part  I. 

131 


132  THE  NATURE  OF  WEALTH.  Book  II. 

Except  perhaps  as  the  crucified  fomenter  of  a  servile 
rebellion,  the  only  class  in  which  any  philosopher  of  the 
ancient  world  might  have  got  a  hearing  that  could  have 
brought  his  name  and  teachings  down  to  us,  was  that 
wealthy  class,  whose  riches  were  largely  in  their  slaves. 
For  in  any  social  condition  in  which  privilege  and  wealth 
are  inequitably  distributed,  what  Jefferson  said  of  Jesus  * 
must  be  true  of  all  moral  or  economic  teachers— "All  the 
learned  of  His  country,  intrenched  in  its  power  and  riches, 
were  opposed  to  Him,  lest  His  labors  should  undermine 
their  advantages." 

The  first  question  which  a  coherent  political  economy 
must  answer  is,  what  is  wealth  ?  This,  in  a  state  of  society 
in  which  the  ruling  class  were  universally  slaveholders, 
was  too  delicate  a  question  for  any  accredited  philosopher 
to  have  fairly  met.  Even  the  most  astute  among  them 
could  go  no  further  than  to  say,  with  the  intellectual  giant 
Aristotle,  that  wealth  "is  all  things  whose  value  is  mea- 
sured by  money,"  or  with  the  Roman  jurist  Ulpian,  "  that 
is  wealth  which  can  be  bought  and  sold."  From  this 
point,  the  very  point  to  which  our  modern  political  econ- 
omy has  in  current  scholastic  teachings  now  come  again, 
though  there  may  be  economies  of  finance  and  economies 
of  exchange  and  economies  of  agriculture  (there  were 
many  such  among  the  Greeks  and  Romans,  their  agricul- 
tural economy  even  teaching  how  slaves  should  be  sold  as 
soon  as  age  and  infirmity  began  to  lessen  the  work  that 
could  be  extorted  from  them),  there  was  and  could  be  no 
political  economy. 

But  this  indisposition  to  recognize  the  distinction  be- 
tween what  may  be  wealth  to  the  individual  and  what  is 


*  "  Syllabus  of  an  estimate  of  the  merits  of  the  doctrines  of  Jesus." 
("The  Writings  of  Thomas  Jefferson,"  collected  and  edited  by  Paul 
Leicester  Ford,  Putnam's  Sons,  Vol.  VIII.,  p.  227.) 


Chap.  II.  CAUSES  OF  CONFUSION.  133 

wealth  to  the  society,  which  has  prevented  the  growth  of 
any  science  of  political  economy  wherever,  either  in  the 
ancient  or  the  modern  world,  the  ownership  of  human 
beings  has  been  an  important  element  in  the  wealth  of  the 
wealthy  class,  has  not  entirely  ceased  to  show  itself  with 
the  abolition  of  chattel  slavery.  Even  the  men  who  have 
seen  that  there  was  a  connection  between  the  failure  of  the 
restless  and  powerful  thinkers  of  the  classic  world  to  de- 
velop a  political  economy  and  their  acceptance  of  slavery, 
have  in  their  own  development  of  political  economy  been 
unconsciously  affected  by  a  similar  retarding  and  aberrat- 
ing influence.  Chattel  slavery  is  only  one  of  the  means  by 
which  individuals  become  wealthy  without  increase  in  the 
general  wealth,  and  as  in  modern  civilization  it  has  lost 
importance,  other  means  to  the  same  end  have  taken  its 
place.  But  wherever  and  from  whatever  causes  society  is 
divided  into  the  very  rich  and  the  very  poor,  the  primary 
question  of  political  economy,  what  is  wealth  ?  must  be  a 
delicate  one  to  men  sensibly  or  insensibly  influenced  by 
the  feelings  and  opinions  of  the  dominating  class.  For 
in  such  social  conditions  much  that  commonly  passes  for 
wealth  must  really  be  only  legalized  robbery,  and  nothing 
can  be  more  offensive  to  those  enjoying  the  profit  of  rob- 
bery than  to  call  it  by  its  true  name. 

In  the  preliminary  remarks  to  his  "  Principles  of  Politi- 
cal Economy  "  John  Stuart  Mill  says : 


It  often  happens  that  the  universal  belief  of  one  age  of  mankind 
—a  belief  from  which  no  one  was,  nor  without  an  extraordinary 
effort  of  genius  and  courage,  could  at  that  time  be  free — becomes  to 
a  subsequent  age  so  palpable  an  absurdity,  that  the  only  difficulty 
then  is  to  imagine  how  such  a  thing  can  ever  have  appeared  credible. 
It  has  so  happened  with  the  doctrine  that  money  is  synonymous  with 
wealth.  The  conceit  seems  too  preposterous  to  be  thought  of  as  a 
serious  opinion.  It  looks  like  one  of  the  crude  fancies  of  childhood, 
instantly  corrected  by  a  word  from  any  grown  person.  But  let  no 


134  THE  NATURE  OF  WEALTH.  BooTc  II. 

one  feel  confident  that  he  should  have  escaped  the  delusion  if  he  had 
lived  at  the  time  when  it  prevailed. 


Let  no  one  be  confident  indeed ! 

Yet  it  is  a  mistake  to  liken  the  absurdities  of  the  mer- 
cantile or  protective  system  to  the  crude  fancies  of  child- 
hood. This  has  never  been  their  origin  or  their  strength. 
In  the  petty  commerce  in  marbles  and  tops  that  goes  on 
among  school-boys  no  boy  ever  imagined  that  the  more 
he  gave  and  the  less  he  got  in  such  exchange  the  better 
off  he  should  be.  No  primitive  people  were  ever  yet  so 
stupid  as  to  suppose  that  they  could  increase  their  wealth 
by  taxing  themselves.  Any  child  that  could  understand 
the  proposition  would  see  that  a  dollar's  worth  of  gold 
could  not  be  more  valuable  than  a  dollar's  worth  of  any- 
thing else,  as  readily  as  it  would  see  that  a  pound  of  lead 
could  not  be  heavier  than  a  pound  of  feathers.  Such 
ideas  are  not  the  fancies  of  childhood.  Their  growth, 
their  strength,  their  persistence,  as  we  may  clearly  see  in 
the  newer  countries  of  America  and  Australia,  where  they 
have  appeared  and  gathered  force  since  Adam  Smith's 
time,  is  due  to  the  growth  of  special  interests  in  artificial 
restrictions  on  trade  as  a  means  of  increasing  individual 
wealth  at  the  expense  of  the  general  wealth. 

The  power  of  a  special  interest,  though  inimical  to  the 
general  interest,  so  to  influence  common  thought  as  to 
make  fallacies  pass  as  truths,  is  a  great  fact  without  which 
neither  the  political  history  of  our  own  time  and  people 
nor  that  of  other  times  and  peoples  can  be  understood. 
A  comparatively  small  number  of  individuals  brought 
into  virtual  though  not  necessarily  formal  agreement  of 
thought  and  action  by  something  that  makes  them  indi- 
vidually wealthy  without  adding  to  the  general  wealth, 
may  exert  an  influence  out  of  all  proportion  to  their  num- 
bers. A  special  interest  of  this  kind  is,  to  the  general  in- 


Chap.  II.  CAUSES  OF  CONFUSION.  135 

terests  of  society,  as  a  standing  army  is  to  an  unorganized 
mob.  It  gains  intensity  and  energy  in  its  specialization, 
and  in  the  wealth  it  takes  from  the  general  stock  finds 
power  to  mold  opinion.  Leisure  and  culture  and  the  cir- 
cumstances and  conditions  that  command  respect  accom- 
pany wealth,  and  intellectual  ability  is  attracted  by  it.  On 
the  other  hand,  those  who  suffer  from  the  injustice  that 
takes  from  the  many  to  enrich  the  few,  are  in  that  very 
thing  deprived  of  the  leisure  to  think,  and  the  opportuni- 
ties, education  and  graces  necessary  to  give  their  thought 
acceptable  expression.  They  are  necessarily  the  "unlet- 
tered," the  "  ignorant,"  the  "  vulgar,"  prone  in  their  con- 
sciousness of  weakness  to  look  up  for  leadership  and 
guidance  to  those  who  have  the  advantages  that  the  pos- 
session of  wealth  can  give. 

Now,  if  we  consider  it,  injustice  and  absurdity  are  sim- 
ply different  aspects  of  incongruity.  That  which  to  right 
reason  is  unjust  must  be  to  right  reason  absurd.  But  an 
injustice  that  impoverishes  the  many  to  enrich  the  few 
shifts  the  centers  of  social  power,  and  thus  controls  the 
social  organs  and  agencies  of  opinion  and  education. 
Growing  in  strength  and  acceptance  by  what  it  feeds  on, 
it  has  only  to  continue  to  exist  to  become  at  length  so 
vested  or  rooted,  not  in  the  constitution  of  the  human 
mind  itself,  but  in  that  constitution  of  opinions,  beliefs  and 
habits  of  thought  which  we  take,  as  we  take  our  mother 
tongue,  from  our  social  environment,  that  it  is  not  per- 
ceived as  injustice  or  absurdity,  but  seems  even  to  the 
philosopher  an  integral  part  of  the  natural  order,  with 
which  it  were  as  idle  if  not  as  impious  to  quarrel  as  with 
the  constitution  of  the  elements.  Even  that  highest  gift, 
the  gift  of  reason,  is  in  its  bestowal  on  man  subjected  to 
his  use,  and  the  very  mental  qualities  that  enable  us  to 
discover  truth  may  be  perverted  to  fortify  error,  and  are 
always  so  perverted  wherever  an  anti-social  special  interest 


136  THE  NATUEE  OF  WEALTH.  Boole  II. 

gains  control  of  the  thinking  and  teaching  functions  of 
society. 

In  this  lies  the  explanation  of  the  fact  that  looking 
through  the  vista  of  what  we  know  of  human  history  we 
everywhere  find  what  are  to  us  the  most  palpable  absurdi- 
ties enshrining  themselves  in  the  human  mind  as  unques- 
tionable truths— whole  nations  the  prey  of  preposterous 
superstitions,  abasing  themselves  before  fellow-creatures, 
often  before  idiots  or  voluptuaries,  whom  their  imagina- 
tion has  converted  into  the  representatives  of  Deity  j  the 
great  masses  toiling,  suffering,  starving,  that  those  they 
bear  on  their  shoulders  may  live  idly  and  daintily.  Wher- 
ever and  whenever  what  we  may  now  see  to  be  a  palpable 
absurdity  has  passed  for  truth,  we  may  see  if  we  look  close 
enough  that  it  has  always  been  because  behind  it  crouched 
some  powerful  special  interest,  and  that  the  man  has 
hushed  the  questioning  of  the  child. 

This  is  of  human  nature.  The  world  is  so  new  to  us 
when  we  first  come  into  it  5  we  are  so  compelled  at  every 
turn  to  rely  upon  what  we  are  told  rather  than  on  what 
we  ourselves  can  discover  j  what  we  find  to  be  the  common 
and  respected  opinion  of  others  has  with  us  such  almost 
irresistible  weight,  that  it  becomes  possible  for  a  special 
interest  by  usurping  the  teaching  province  to  make  to  us 
black  seem  white  and  wrong  seem  right. 

Let  no  one  indeed  feel  confident  that  he  could  have  es- 
caped any  delusion,  no  matter  how  preposterous,  that  has 
ever  prevailed  among  men,  if  he  had  lived  when  and  where 
it  was  accepted.  From  as  far  back  as  we  can  see,  human 
nature  has  not  changed,  and  we  have  but  to  look  around 
us  to  discover  in  operation  to-day  the  great  agency  that 
has  made  falsehood  seem  truth. 

Of  the  fact  of  which,  in  what  I  have  quoted,  John  Stuart 
Mill  speaks  with  reference  to  the  doctrine  that  money  is 
synonymous  with  wealth— the  fact  that  accepted  opinion 


Chap.  II.  CAUSES  OF  CONFUSION.  137 

may  blind  even  able  and  courageous  men— lie  himself,  in 
the  same  book  and  almost  in  the  same  paragraph,  gives 
unconscious  illustration,  in  the  timidity  with  which  he 
touches  the  question  of  the  nature  of  wealth,  when  it  leads 
beyond  what  Adam  Smith  had  already  shown,  that  it  was 
not  synonymous  with  money.  He  recognizes,  indeed, 
that  what  is  wealth  to  an  individual  is  not  therefore  wealth 
to  the  community  or  nation,  and  definitely  states,  or  rather 
concedes,  that  debt,  even  funded  debt,  is  no  part  of  the 
wealth  of  the  society.  But  the  way  in  which  he  does  this 
is  suggestive.  He  says : 

The  canceling  of  the  debt  would  be  no  destruction  of  wealth,  but 
a  transfer  of  it ;  a  wrongful  abstraction  of  wealth  from  certain  mem- 
bers of  the  community,  for  the  profit  of  the  government  or  of  the 
taxpayers. 

The  gratuitous  word  "  wrongful n  shows  the  bias.  And 
even  this  recognition  that  debt  cannot  be  wealth  in  the 
economic  sense  is  ignored  in  the  subsequent  definition  of 
wealth. 

So  strongly  indeed  was  John  Stuart  Mill,  who  seems  to 
me  a  very  type  of  intellectual  honesty,  under  the  influence 
of  the  accustomed  ideas  of  his  time  and  class,  that  al- 
though he  saw  with  perfect  clearness  that  the  wealth  that 
comes  to  individuals  by  reason  of  their  monopoly  of  land 
really  comes  to  them  through  force  and  fraud,  yet  he 
seemingly  never  dreamed  that  land  was  no  part  of  national 
wealth.  Nor  yet,  does  he  seem  even  to  dream  that  the 
people  of  a  country,  once  they  had  been  forcibly  deprived 
of  it,  could  recover  what  he  saw  to  be  their  natural  right. 
In  all  the  history  of  dead  absurdities  there  can  be  no  sen- 
tence more  strikingly  illustrative  of  the  power  of  accepted 
opinion  to  hide  absurdity  than  this  of  his : 

The  land  of  Ireland,  the  land  of  every  country,  belongs  to  the 
people  of  that  country.  The  individuals  called  landowners  have  no 


138  THE  NATUEE  OF  WEALTH.  Book  II. 

right  in  morality  and  justice  to  anything  "but  rent,  or  compensation 
for  its  salable  value. 


This  is  simply  to  say  that  the  ownership  of  the  land  of 
Ireland  gave  the  people  who  morally  owned  it  the  right  to 
lwij  it  from  those  who  did  not  morally  own  it. 

What  was  it  that  hid  from  this  trained  logician  and 
radically  minded  man  the  patent  absurdity  of  saying  that 
the  individuals  called  landowners  had  no  right  to  land, 
except  that  which  is  the  sum  and  expression  of  all  ex- 
changeable rights  to  land— rent  ? 

Whoever  will  examine  his  writings  will  see  that  it  was 
his  previous  acceptance  of  certain  doctrines— doctrines 
with  which  a  succession  of  ingenious  men  had  endeavored 
to  bring  into  semblance  of  logical  coherence  a  political 
economy  vitalty  defective,  and  which  resembled  the  elabo- 
rate system  of  cycles  and  epicycles  with  which  the  ingenu- 
ity of  astronomers  previous  to  Copernicus  had  endeavored 
to  account  for  the  movements  of  the  heavenly  bodies. 

When  an  incongruous  substance,  such  for  instance  as  a 
bullet,  is  implanted  in  the  human  body,  the  physical  system, 
as  soon  as  it  despairs  of  its  removal,  sets  about  the  en- 
deavor to  accommodate  itself  to  the  incongruity,  frequent- 
ly with  such  success  that  at  length  the  incongruity  is  not 
noticed.  The  stout,  masterful  man  with  whom  I  have  just 
now  been  talking,  and  whom  you  might  liken  to  a  bull  if 
it  were  not  for  the  intelligence  of  his  face,  has  long  carried 
a  bullet  under  his  skin.  And  men  have  even  been  known 
to  live  for  years  with  bullets  in  their  brains. 

So,  too,  with  philosophical  systems.  When  an  incon- 
gruity is  accepted  in  a  philosophical  system,  the  abilities 
of  its  professors  are  at  once  set  to  work  to  accommodate 
other  parts  of  the  system  to  the  incongruity,  frequently 
with  such  success  that  philosophical  systems  containing 
fatal  incongruities  have  been  known  to  command  accep- 


Chap.  II.  CAUSES  OF  CONFUSION.  139 

tance  for  long  generations.  For  the  mind  of  man  is  even 
more  plastic  than  the  body  of  man,  and  the  human  imagi- 
nation, which  is  the  chief  element  in  the  building  up  of 
philosophical  systems,  furnishes  a  lymph  more  subtle  than 
that  which  the  blood  supplies  to  the  bodily  system. 

Indeed,  the  artificialities  and  confusions  by  which  an 
incongruity  is  made  tolerable  to  a  philosophic  system,  for 
the  very  reason  that  they  cannot  be  understood  except  by 
those  who  have  submitted  their  minds  to  a  special  course 
of  cramping,  become  to  them  a  seeming  evidence  of  su- 
periority, gratifying  a  vanity  like  that  of  the  contortionist 
who  has  painfully  learned  to  walk  a  little  way  on  his  hands 
instead  of  his  feet  and  to  twist  his  body  into  unnatural 
and  unnecessary  positions  j  or  like  that  of  the  conveyancer 
or  lawyer,  who  has  in  the  same  way  painfully  learned  to 
perform  such  tricks  with  language. 

And  just  as  the  long  toleration  by  the  physical  system 
of  such  an  incongruity  as  a  bullet,  a  tumor  or  a  dislocation, 
by  reason  of  the  efforts  which  the  system  has  made  to  rec- 
oncile to  it  other  parts  and  functions,  renders  it  more  diffi- 
cult of  removal  or  remedy,  so  the  toleration  in  a  philosoph- 
ical system  of  an  incongruity  makes  its  removal  or  remedy 
far  more  difficult  to  those  who  have  bent  their  minds  to 
the  system  as  it  has  by  ingenious  men  been  adapted  to  the 
incongruity,  than  it  is  to  those  who  approach  the  subject 
from  first  principles,  and  who  if  they  may  have  more  to 
learn  have  less  to  unlearn.  For  it  is  true,  as  Bacon  said, 
that  "  a  cripple  in  the  right  way  may  beat  a  racer  in  the 
wrong  one.  Nay,  the  fleeter  the  racer  is  who  has  once 
missed  his  way,  the  farther  he  leaves  it  behind." 

This,  I  think,  is  what  was  meant  in  the  concise  but  deep 
philosophy  of  Christ  by  such  sayings  as  that  the  Kingdom 
of  Heaven,  or  system  of  right-doing,  though  revealed  unto 
babes,  is  hidden  from  those  deemed  wise  and  prudent,  and 
that  what  the  common  people  heard  gladly  was  foolishness 


140  THE  NATURE  OF  WEALTH.  Book  II. 

to  the  learned  scribes  and  pharisees.  With  illustrations 
of  this  principle  the  history  of  accepted  opinion  in  every 
time  and  place  abounds. 

It  is  not  to  the  fancies  of  childhood  that  we  must  look 
for  an  explanation  of  the  strength  of  long  dominant 
absurdities.  Michelet  ("The  People")  truly  says:  "No 
consecrated  absurdity  would  have  stood  its  ground  in  this 
world  if  the  man  had  not  silenced  the  objection  of  the  child." 

But  not  to  depart  from  the  matter  in  hand :  It  is  evi- 
dent that  the  existence  of  a  powerful  class  whose  incomes 
could  not  fail  to  be  endangered  by  a  recognition  of  the  fact 
that  what  makes  them  individually  wealthy  is  not  any  part 
of  the  wealth  of  society,  but  only  robbery,  must  from  the 
beginning  of  the  cultivation  of  political  economy  in  modern 
times  have  beset  its  primary  step,  the  determination  of 
what  the  wealth  of  society  consists  of,  with  something  of 
the  same  difficulty  that  prevented  its  development  in  classic 
times.  And  when  the  development  commenced,  and 
especially  after  it  had  been  taken  charge  of  by  the  colleges 
and  universities,  which  as  at  present  constituted  must  be 
peculiarly  susceptible  to  the  influence  of  the  wealthy 
classes,  it  is  evident  that  the  efforts  of  able  men  to  bring 
into  some  semblance  of  coherency  a  system  of  political 
economy  destitute  of  any  clear  and  coherent  definition  of 
wealth  must  have  surrounded  the  subject  with  greater 
perplexities  and  helped  powerfully  to  prevent  the  need  of 
a  definition  of  wealth  from  being  felt. 

This  is  precisely  what  we  see  when  we  examine  the  dif- 
ferent attempts  to  define  wealth  in  the  economic  sense, 
and  note  the  increasing  confusions  that  have  attended 
them,  culminating  in  the  acceptance  of  the  common  mean- 
ing of  the  word  wealth— anything  that  has  exchangeable 
power— as  the  only  meaning  that  can  be  given  to  the  eco- 
nomic term;  and  the  consequent  abandonment  of  the 
possibility  of  a  science  of  political  economy. 


Chap.  II.  CAUSES  OF  CONFUSION.  141 

Archbishop  Whately,  in  the  chapter  on  ambiguous  terms 
appended  to  his  "  Elements  of  Logic,"  says  in  speaking  of 
one  of  the  ambiguities  of  the  word  wealth,  that  which 
led  to  the  use  of  wealth  as  synonymous  with  money : 

Tlie  results  have  been  fraud,  punishment  and  poverty  at  home,  and 
discord  and  war  without.  It  has  made  nations  consider  the  wealth 
of  their  customers  a  source  of  loss  instead  of  profit ;  and  an  advan- 
tageous market  a  curse  instead  of  a  blessing.  By  inducing  them  to 
refuse  to  profit  by  the  peculiar  advantages  in  climate,  soil  or  indus- 
try, possessed  by  their  neighbors,  it  has  forced  them  in  a  great 
measure  to  give  up  their  own.  It  has  for  centuries  done  more,  and 
perhaps  for  centuries  to  come  will  do  more,  to  retard  the  improve- 
ment of  Europe  than  all  other  causes  put  together. 

In  this,  the  Archbishop,  though  famous  as  a  logician, 
"  puts  the  cart  before  the  horse." 

These  are  not  the  effects  of  the  confusion  of  a  term. 
The  confusion  of  the  term  is  one  of  the  effects  of  the  in- 
fluence upon  thought  of  the  same  special  interest  that  in 
its  efforts  to  give  wealth  to  individuals  at  the  expense  of 
the  general  wealth,  has  done  and  is  doing  all  this. 

Nor  can  this  power  of  a  great  pecuniary  interest  to 
affect  thought,  and  especially  to  affect  thought  in  those 
circles  of  society  whose  opinions  are  most  respected,  ever 
be  done  away  with  save  by  the  abolition  of  its  cause — the 
social  adjustment  or  institution  that  gives  power  to  obtain 
wealth  without  earning  it.  The  pecuniary  interest  in  the 
ownership  of  slaves  was  never  very  large  in  the  United 
States.  But  it  so  dominated  the  thought  of  the  whole 
country  that  up  to  the  outbreak  of  the  civil  war  the  term 
abolitionist  was  to  good,  kindly  and  intelligent  people 
even  in  the  North  an  expression  that  meant  everything 
vile  and  wicked.  And  whatever  else  might  have  been  the 
issue  of  the  war,  had  the  pecuniary  interest  in  the  main- 
tenance of  slavery  remained,  it  would  still  have  continued 
to  show  itself  in  thought.  But  as  soon  as  the  supplies  of 


142  THE  NATURE   OF  WEALTH.  Book  II. 

the  slave-owning  interest  were  cut  off  by  the  freeing  of 
the  slaves  this  power  upon  opinion  vanished.  Now,  no 
preacher,  professor  or  politician,  even  in  the  South,  would 
think  of  advocating  or  defending  slavery  j  and  in  Boston, 
where  he  narrowly  escaped  mobbing,  stands  a  public  statue 
of  William  Lloyd  Garrison. 


CHAPTER  III. 
WHAT   ADAM   SMITH   MEANT   BY  WEALTH. 

SHOWING  HOW  ESSENTIALLY  ADAM  SMITH'S  PRIMARY  CON- 
CEPTION OF  WEALTH  DIFFERED  FROM  THAT  NOW  HELD 
BY  HIS  SUCCESSORS. 

Significance  of  the  title  "  Wealth  of  Nations  "—Its  origin  shown  in 
Smith's  reference  to  the  Physiocrats— His  conception  of  wealth 
in  his  introduction — Objection  by  Malthus  and  by  Macleod— 
Smith's  primary  conception  that  given  in  "  Progress  and  Poverty  " 
—His  subsequent  confusions. 

IF,  considering  the  increasing  indefiniteness  among  pro- 
fessed economists  as  to  the  nature  of  wealth,  we  com- 
pare Adam  Smith's  great  book  with  the  treatises  that  have 
succeeded  it,  we  may  observe  on  its  very  title-page  some- 
thing usually  unnoticed,  but  really  very  significant.  Adam 
Smith  does  not  propose  an  inquiry  into  the  nature  and 
causes  of  wealth,  but  "an  inquiry  into  the  nature  and 
causes  of  the  wealth  of  nations" 

The  words  I  here  italicize  have  become  the  descriptive 
title  of  the  book.  This  is  known,  not  as  "  Adam  Smith's 
Inquiry,"  or  "Adam  Smith's  Wealth,"  but  as  "Adam 
Smith's  Wealth  of  Nations."  Yet  these  limiting  words, 
"of  nations,"  seem  to  have  been  little  noticed  and  less 
understood  by  the  writers  who  in  increasing  numbers  for 
almost  a  hundred  years  have  taken  this  great  book  as  a 

143 


144  THE  NATURE  OF   WEALTH.  Book  II. 

basis  for  their  elucidations  and  supposed  improvements. 
Their  assumption  seems  to  be  that  it  is  wealth  generally  or 
wealth  without  limitation  which  Adam  Smith  treats  of  and 
which  is  the  proper  subject  of  political  economy,  and  that 
if  he  meant  anything  by  his  determining  words  "of  na- 
tions," he  referred  to  such  political  divisions  as  England, 
France,  Holland,  etc. 

Some  superficial  plausibility  is  perhaps  given  to  this 
view  from  the  fact  that  one  of  the  divisions  of  the  "  Wealth 
of  Nations,"  Book  III.,  is  entitled  "  Of  the  Different  Prog- 
ress of  Opulence  in  Different  Nations,"  and  that  in  it  illus- 
trative reference  is  made  to  various  ancient  and  modern 
states.  But  that  in  his  choice  of  the  limiting  words  "  of 
nations  "  as  indicating  the  kind  of  wealth  into  the  nature 
and  causes  of  which  he  proposed  to  inquire,  Adam  Smith 
referred  to  something  other  than  the  political  divisions  of 
mankind  called  states  or  nations,  is  sufficiently  clear. 

While  he  is,  as  I  have  said,  not  very  definite  and  not 
entirely  consistent  in  his  use  of  the  term  wealth,  yet  it 
is  certain  that  what  he  meant  by  "the  wealth  of  nations," 
of  the  nature  and  causes  of  which  he  proposed  to  inquire, 
was  something  essentially  different  from  what  is  meant  by 
wealth  in  the  ordinary  use  of  the  word,  which  includes  as 
wealth  everything  that  may  give  wealthiness  to  the  indi- 
vidual considered  apart  from  other  individuals.  It  was 
that  kind  of  wealth  the  production  of  which  increases  and 
the  destruction  of  which  decreases  the  wealth  of  society  as 
a  whole,  or  of  mankind  collectively,  which  he  sought  to 
distinguish  from  the  word  "wealth"  in  its  common  or 
individual  sense  by  the  limiting  words,  "  of  nations,"  in  the 
meaning  not  of  the  larger  political  divisions  of  mankind, 
but  of  societies  or  social  organisms. 

In  the  body  of  the  "Wealth  of  Nations"  there  occurs 
again  the  phrase  which  furnished  Adam  Smith  the  title 
for  his  ten  years'  work.  In  Book  IV.,  speaking  of  those 


Chap.  III.      WHAT   SMITH  MEANT  BY  WEALTH.  145 

members  of  "  the  French  republic  of  letters  "  who  at  that 
time  called  themselves  and  were  called  "  Economists/'  but 
who  have  been  since  distinguished  from  other  economists, 
real  or  pretended,  by  the  name  of  Physiocrats,*— a  school 
who  might  be  better  still  distinguished  as  the  Single  Taxers 
of  the  Eighteenth  Century,  he  says  (the  italics  are  mine) : 

This  sect,  in  their  works,  which  are  very  numerous,  and  which 
treat  not  only  of  what  is  properly  called  political  economy,  or  of  the 
nature  and  causes  of  the  wealth  of  nations,  but  of  every  other  branch 
of  the  system  of  civil  government,  all  follow  implicitly,  and  without 
any  sensible  variation,  the  doctrines  of  Mr.  Quesnai. 

This  recognition  of  the  fact  that,  not  wealth  in  the  loose 
and  common  sense  of  the  word,  but  that  which  is  wealth 
to  societies  considered  as  wholes,  or  as  he  phrased  it,  "  the 
wealth  of  nations,"  is  the  proper  subject-matter  of  what  is 
properly  called  political  economy— shows  the  origin  of  the 
title  Adam  Smith  chose  for  his  book.  He  had  doubtless 
thought  of  calling  it  a  "Political  Economy,"  but  either 
from  the  consciousness  that  his  work  was  incomplete,  or 
from  the  modesty  of  his  real  greatness,  finally  preferred 
the  less  pretentious  title,  which  expressed  to  his  mind  the 
same  idea,  "An  inquiry  into  the  Nature  and  Causes  of 
the  Wealth  of  Nations." 

It  has  been  much  complained  of  Adam  Smith  that  he 
does  not  define  what  he  means  by  wealth.  But  this  has 
been  exaggerated.  In  the  very  first  paragraph  of  the 
introduction  to  his  work  he  thus  explains  what  he  means 
by  the  wealth  of  nations,  the  only  sense  of  the  word  wealth 
which  it  is  the  business  "  of  what  is  properly  called  politi- 
cal economy  "  to  consider : 


*  From  pliysiocratie,  or  government  in  the  nature  of  things,  or  nat- 
ural order,  a  name  suggested,  in  1768,  by  Dupont  de  Nemours,  one 
of  the  most  active  of  their  number. 


146  THE  NATURE  OF  WEALTH.  Book  II. 

The  annual  labor  of  every  nation  is  the  fund  which  originally  sup- 
plies it  with  all  the  necessaries  and  conveniences  of  life  which  it 
annually  consumes,  and  which  consist  always  either  in  the  immedi- 
ate produce  of  that  labor,  or  in  what  is  purchased  with  that  produce 
from  other  nations. 

Again,  in  the  last  sentence  of  this  introduction  he  speaks 
of  "  the  real  wealth,  the  annual  produce  of  the  land  and 
labor  of  the  society."  And  in  other  places  throughout  the 
book  he  also  speaks  of  this  wealth  of  society  or  wealth  of 
nations,  or  real  wealth,  as  the  produce  of  land  and  labor. 

What  he  meant  by  the  produce  of  land  and  labor  was  of 
course  not  the  produce  of  land  plus  the  produce  of  labor, 
but  the  joint  produce  of  both— that  is  to  say :  the  result  of 
labor,  the  active  factor  of  all  production,  exerted  upon  land, 
the  passive  factor  of  all  production,  in  such  a  way  as  to  fit 
it  (land  or  matter)  for  the  gratification  of  human  desires. 
Malthus,  indorsed  by  McCulloch  and  a  long  line  of  com- 
mentators upon  Adam  Smith,  objects  to  his  definition  that 
"  it  includes  all  the  useless  products  of  the  earth,  as  well 
as  those  which  are  appropriated  and  enjoyed  by  man." 
And  in  the  same  way  Macleod,  a  recent  writer  whose  ability 
to  say  clearly  what  he  wants  to  say  makes  his  "  Elements 
of  Economics,"  despite  its  essential  defects,  a  grateful  relief 
among  economic  writings,  objects  that  if — 

the  annual  produce  of  land  and  labor,  either  separately  or  combined, 
is  wealth,  then  every  useless  product  of  the  earth  is  wealth,  as  well 
as  the  most  useful — the  tares  as  well  as  the  wheat.  If  a  diver  fetch 
a  pearl  oyster  from  the  deep  sea,  the  shell  is  as  much  the  "  produce 
of  land  and  labor  "  as  the  pearl  itself.  So  if  a  nugget  of  gold  or  a 
diamond  is  obtained  from  a  mine,  the  rubbish  it  is  found  in  and 
brought  up  with  is  as  much  the  " produce  of  land  and  labor"  as  the 
gold  or  the  diamond ;  and  innumerable  instances  of  this  sort  may  be 
cited. 

The  communication  of  thought  by  speech  would  be  at 
an  end  if  Adam  Smith  could  be  asked  to  explain  that  the 


Chap.  III.      WHAT   SMITH  MEANT  BY  WEALTH.  147 

produce  of  labor  means  what  the  labor  is  exerted  to  get, 
not  what  it  is  incidentally  obliged  to  remove  in  the  process 
of  getting  that.  Yet  most  of  the  complaints  of  his  failure 
to  say  what  he  means  by  wealth  have  no  better  basis  than 
these  objections. 

In  truth  whoever  will  attend  to  the  obvious  meaning  of 
the  word  he  uses  will  see  that  what  Adam  Smith  meant  by 
"  the  wealth  of  nations  "  or  wealth  in  the  sense  it  is  to  be 
considered  in  "  what  is  properly  called  political  economy," 
is  in  reality  what  in  the  chapter  of  "  Progress  and  Poverty  " 
entitled  "  The  Meaning  of  the  Terms  "  (Book  I.,  Chapter  II.) 
is  given  as  the  proper  meaning  of  the  economic  term— 
namely,  that  of  "  natural  products  that  have  been  secured, 
moved,  combined,  separated,  or  in  other  ways  modified  by 
human  exertion,  so  as  to  fit  them  for  the  gratification  of 
human  desires." 

Through  the  first  and  most  important  part  of  his  work, 
this  is  the  idea  which  Smith  has  constantly  in  mind  and 
to  which  he  constantly  adheres  in  tracing  all  production 
of  wealth  to  labor.  But  having  grasped  this  idea  of  the 
nature  of  wealth  without  having  clearly  defined  its  relation 
to  other  ideas  still  lying  in  his  mind,  he  falls  into  the  sub- 
sequent confusion  of  also  classing  personal  qualities  and 
debts  as  wealth. 


CHAPTER  IV. 
THE  FRENCH  PHYSIOCRATS. 

SHOWING  WHO  THE  FIRST  DEVELOPERS  OF  A  TRUE  SCIENCE 
OF  POLITICAL  ECONOMY  WERE,  AND  WHAT  THEY  HELD. 

Quesnay  and  his  followers— The  great  truths  they  grasped  and  the 
cause  of  the  confusion  into  which  they  fell— This  used  to  dis- 
credit their  whole  system,  but  not  really  vital— They  were  real 
free  traders — The  scant  justice  yet  done  them — Reference  to 
them  in  "Progress  and  Poverty"— Macleod's  statement  of  their 
doctrine  of  natural  order — Their  conception  of  wealth — Their 
day  of  hope  and  their  fall. 

THE  first  developers  in  modern  times  of  something 
like  a  true  science  of  political  economy,  or,  rather 
(since  social  truths,  though  they  may  be  covered  up  and 
for  a  while  ignored,  must  since  the  origin  of  human  so- 
ciety  always  have  been  here  to  be  seen),  the  men  who  first 
got  a  hearing  large  enough  and  wide  enough  to  bring 
down  their  names  and  their  teachings  to  our  times,  were 
the  French  philosophers  whom  Adam  Smith  speaks  of  in 
the  sentence  before  quoted,  as  the  sect  who  "all  follow 
implicitly,  and  without  any  sensible  variation,  the  doctrines 
of  Mr.  Quesnai." 

Francois  Quesnai,  or  Quesnay,  as  the  name  is  now  usu- 
ally spelled,  a  French  philosopher,  who,  as  McCulloch  says, 
was  "  equally  distinguished  for  the  subtlety  and  originality 
of  his  understanding  and  the  integrity  and  simplicity  of 
his  character,"  was  born  June  4,  1694,  twenty-eight  years 

148 


Chap.  IV.  THE  FRENCH  PHYSIOCRATS.  149 

before  Adam  Smith,  at  Mercy,  some  ten  leagues  from  Paris. 
Beginning  life  in  the  manual  labor  of  the  farm,  he  was 
without  either  the  advantages  or,  as  they  often  prove  to 
men  of  parts,  the  disadvantages  of  a  scholastic  education. 
With  much  effort  he  taught  himself  to  read,  became  ap- 
prentice to  a  surgeon,  and  at  length  began  practice  for 
himself  at  Mantes,  where  he  acquired  some  means  and 
came  to  the  knowledge  of  Marshal  de  Noailles,  who  spoke 
of  him  to  the  queen,  who  in  her  turn  recommended  him 
to  the  king.  He  finally  settled  in  Paris,  bought  the  place 
of  physician  to  the  king,  and  was  made  by  the  monarch 
his  first  physician.  Abstaining  from  the  intrigues  of  the 
court,  he  won  the  sincere  respect  of  Louis  XV.,  with  whom 
as  his  first  physician  he  was  brought  into  close  personal 
contact.  The  king  made  him  a  noble,  gave  him  a  coat  of 
arms,  assigned  him  apartments  in  the  palace,  calling  him 
affectionately  his  thinker,  and  had  his  books  printed  in 
the  royal  printing-office.  And  around  him,  in  his  apart- 
ments in  the  palace  of  Versailles,  this  " King's  Thinker" 
was  accustomed  to  gather  a  group  of  eminent  men  who 
joined  him  in  an  aim  the  grandest  the  human  mind  can 
entertain— being  nothing  less  than  the  establishment  of 
liberty  and  the  abolition  of  poverty  among  men,  by  the 
conformation  of  human  laws  to  the  natural  order  intended 
by  the  Creator. 

These  men  saw  what  has  often  been  forgotten  amid  the 
complexities  of  a  high  civilization,  but  is  yet  as  clear  as 
the  sun  at  noonday  to  whoever  considers  first  principles. 
They  saw  that  there  is  but  one  source  on  which  men  can 
draw  for  all  their  material  needs— land ;  and  that  there  is 
but  one  means  by  which  land  can  be  made  to  yield  to 
their  desires— labor.  All  real  wealth,  they  therefore  saw, 
all  that  constitutes  or  can  constitute  any  part  of  the  wealth 
of  society  as  a  whole,  or  of  the  wealth  of  nations,  is  the 
result  or  product  of  the  application  of  labor  to  land. 


160  THE  NATUEE  OF  WEALTH.  Book  II. 

They  had  not  only  grasped  this  first  principle— from 
which  any  true  economy,  even  that  of  a  savage  tribe  or  an 
isolated  individual,  must  start— but  they  had  grasped  the 
central  principle  of  a  true  political  economy.  This  is  the 
principle  that  in  the  natural  growth  of  the  social  organism 
into  which  men  are  integrated  in  society  there  is  developed 
a  fund  which  is  the  natural  provision  for  the  natural  needs 
of  that  organism— a  fund  which  is  not  merely  sufficient 
for  all  the  material  wants  of  society,  and  may  be  taken 
for  that  purpose,  its  intended  destination,  without  depriv- 
ing the  unit  of  anything  rightfully  his ;  but  which  must  be 
so  taken  to  prevent  the  gravest  injuries  to  individuals  and 
the  direst  disasters  to  the  state. 

This  fund  Quesnay  and  his  followers  styled  HLG  produit 
net— the  net,  or  surplus,  or  remaining,  product.  They 
called  it  this,  evidently  because  they  saw  it  as  something 
which  remained,  attached,  as  it  were,  to  the  control  of 
land,  after  all  the  expenses  of  production  that  are  resolvable 
into  compensation  for  the  exertion  of  individual  labor  are 
paid.  What  they  really  meant  by  the  prodm^net,  or  net 
product,  is  precisely  what  is  properly  to  be  understood  in 
English  by  the  word  "  rent "  when  used  in  the  special  sense 
or  technical  meaning  wHicli  it  has  acquired  since  Ricardo's 
time  as  a  term  of  political  economy.  Net  product  is  really 
a  better  term  than  rent,  as  not  being  so  liable  to  confusion 
with  a  word  in  constant  use  in  another  sense ;  and  John 
Stuart  Mill,  probably  without  thought  of  the  Physiocrats, 
came  very  close  to  the  perception  that  governed  their 
choice  of  a  term  when  he  spoke  of  economic  rent  as  "the 
unearned  increment  of  land  values." 

That  Quesnay  and  his  associates  saw  the  enormous  sig- 
nificance of  this  "  net  product "  or  "  unearned  increment " 
for  which  our  economic  term  is  "  rent/'  is  clear  from  their 
practical  proposition,  the  impot  unique,  or  single  tax.  By 
this  they  meant  just  what  its  modern  advocates  now  mean 


CJtap.  IV y  THE  FBENCH  PHYSIOCRATS.  151 

by  it— the  abolition  of  all  taxes  whatever  on  the  making, 
the  exchanging  or  the  possession  of  wealth  in  any  form, 
and  the  recourse  for  public  revenues  to  economic  rent; 
the  net  or  surplus  product ;  the  (to  the  individual)  unearned 
increment  which  attaches  to  land  wherever  in  the  progress 
of  society  any  particular  piece  of  land  comes  to  afford  to 
the  user  superior  opportunities  to  those  obtainable  on  land 
that  any  one  is  free  to  use. 

In  grasping  the  real  meaning  and  intent  of  the  net  prod- 
uct, or  economic  rent,  there  was  opened  to  the  Physiocrats 
a  true  system  of  political  economy— a  system  of  harmonious 
order  and  beneficent  purpose.  They  had  grasped  the  key 
without  which  no  true  science  of  political  economy  is  pos- 
sible, and  from  the  refusal  to  accept  which  the  scholastic 
economy  that  has  succeeded  Adam  Smith  is,  after  nearly 
a  hundred  years  of  cultivation,  during  which  it  has  sunk 
into  the  contemptible  position  of  "  the  dismal  science/'  now 
slipping  into  confessed  incompetency  and  rejection. 

But  misled  by  defective  observation  and  a  habit  of 
thought  that  prevailed  long  after  them,  and  indeed  yet 
largely  prevails  (a  matter  to  which  I  shall  subsequently 
more  fully  allude),  the  Physiocrats  failed  to  perceive  that 
what  they  called  the  net  or  surplus  product,  and  what  we 
now  call  economic  rent,  or  the  unearned  increment,  may 
attach  to  land  used  for  any  purpose.  Looking  for  some 
explanation  in  natural  law  of  what  was  then  doubtless 
generally  assumed  to  be  the  fact,  and  of  which  I  know  of 
no  clear  contradiction  until  "  Progress  and  Poverty  "  was 
written,  that  agriculture  is  the  only  occupation  which 
yields  to  the  landlord  a  net  or  surplus  product,  or  unearned 
increment  (rent),  over  and  above  the  expenses  of  produc- 
tion, they  not  unnaturally  under  the  circumstances  hit 
upon  a  striking  difference  between  agriculture,  which 
grows  things,  and  the  mechanical  and  trading  occupations, 
which  merely  change  things  in  form,  place  or  ownership, 


152  THE  NATURE  OF  WEALTH.  Book  II. 

as  furnishing  the  explanation  for  which  they  were  in 
search.  This  difference  lies  in  the  use  which  agriculture 
makes  of  the  generative  or  reproductive  principle  in 
nature. 

This  supposed  fact,  and  what  seemed  to  them  the  ra- 
tional explanation  of  it,  in  the  peculiar  use  made  in  agri- 
culture of  the  principle  of  growth  and  reproduction  which 
characterizes  all  forms  of  life,  vegetable  and  animal,  the 
Physiocrats  expressed  in  their  terminology  by  styling 
agriculture  the  only  productive  occupation.  All  other 
occupations,  however  useful,  they  regarded  as  sterile  or 
barren,  insomuch  as  under  the  fact  assumed  such  occu- 
pations give  rise  to  no  net  produce  or  unearned  increment, 
merely  returning  again  to  the  general  fund  of  wealth,  or 
gross  product,  the  equivalent  of  what  they  had  taken  from 
it  in  changing  the  form,  place  or  ownership  of  material 
things  already  in  existence. 

This  was  their  great  and  fatal  misapprehension,  since  it 
has  been  effectually  used  to  discredit  their  whole  system. 

Still,  it  was  not  really  a  vital  mistake.  That  is  to  say, 
it  made  no  change  in  their  practical  proposals.  The  fol- 
lowers of  Quesnay  insisted  that  agriculture,  in  which  they 
admitted  fisheries  and  mines,  was  the  only  productive 
occupation,  or  in  other  words  the  only  application  of  labor 
that  added  to  the  sum  of  wealth  ;  while  manufactures  and 
exchange,  though  useful,  were  sterile,  merely  changing  the 
form  or  place  of  wealth  without  adding  to  its  sum.  They, 
however,  proposed  no  restrictions  or  disabilities  whatever 
on  the  occupations  they  thus  stigmatized.  On  the  con- 
trary, they  were— what  the  so-called  "English  free  traders" 
who  have  followed  Adam  Smith  never  yet  have  been— 
free  traders  in  the  full  sense  of  the  term.  In  their  practical 
proposition,  the  single  tax,  they  proposed  the  only  means 
by  which  the  free  trade  principle  can  ever  be  carried  to  its 
logical  conclusion— the  freedom  not  merely  of  trade,  but 


Chap.  IF.  THE  FRENCH  PHYSIOCRATS.  153 

of  all  other  forms  and  modes  of  production,  with  full  free- 
dom of  access  to  the  natural  element  which  is  essential  to 
all  production.  They  were  the  authors  of  the  motto  that 
in  the  English  use  of  the  phrase  "  Laissez  faire! n  "  Let 
things  alone/'  has  been  so  emasculated  and  perverted,  but 
which  on  their  lips  was,  "  Laissez  faire,  laissez  oiler?  "  Clear 
the  ways  and  let  things  alone ! "  This  is  said  to  come 
from  the  cry  that  in  medieval  tournaments  gave  the  signal 
for  combat.  The  English  motto  which  I  take  to  come 
closest  to  the  spirit  of  the  French  phrase  is,  "A  fair  field 
and  no  favor !  " 

It  is  for  the  reason  that  of  all  modern  philosophers  they 
not  only  were  the  first,  but  were  really  true  free  traders, 
that  I  dedicated  to  the  memory  of  Quesnay  and  his  fellows 
my  "  Protection  or  Free  Trade  "  (1885),  saying : 

By  thus  carrying  the  inquiry  beyond  the  point  where  Adam  Smith 
and  the  writers  who  have  followed  him  have  stopped,  I  believe  I  have 
stripped  the  vexed  tariff  question  of  its  greatest  difficulties,  and  have 
cleared  the  way  for  the  settlement  of  a  dispute  which  otherwise  might 
go  on  interminably.  The  conclusions  thus  reached  raise  the  doctrine 
of  free  trade  from  the  emasculated  form  in  which  it  has  been  taught 
by  the  English  economists  to  the  fullness  in  which  it  was  held  by  the 
predecessors  of  Adam  Smith,  those  illustrious  Frenchmen,  with  whom 
originated  the  motto  "  Laissez  faire,"  and  who,  whatever  may  have 
been  the  confusions  of  their  terminology  or  the  faults  of  their  methodj 
grasped  a  central  truth  which  free  traders  since  their  time  have  ignored. 

These  French  "  Economists,"  now  more  definitely  known 
as  Physiocrats,  or  single  taxers,  had  got  hold  of  what  in 
its  bearings  on  philosophy  and  politics  is  probably[the 
greatest  of  truths ;  but  had  got  hold  of  it  through  curi- 
ously distorted  apprehensions.  It  was  to  them,  however, 
like  a  rainbow  seen  through  clouds.  They  did  not  see  the 
full  sweep  of  the  majestic  curve,  and  endeavored  to  piece 
out  their  lack  of  insight  with  a  confused  and  confusing 
terminology.  But  what  they  did  see  showed  them  its  trend, 
and  they  felt  that  natural  laws  could  be  trusted  where 


154  THE  NATURE  OF  WEALTH.  Book  II. 

attempts  to  order  the  world  by  human  legislation  would 
be  certain  to  go  astray. 

Yet  nothing  better  shows  the  importance  of  correct 
theory  to  the  progress  of  truth  against  the  resistance  of 
powerful  special  interests  than  the  complete  overthrow  of 
the  Physiocrats.  Their  mistake  in  theory  has  sufficed  to 
prevent,  or  perhaps  rather  to  furnish  a  sufficient  excuse  to 
prevent  the  justice  and  expediency  of  their  practical  pro- 
posal from  being  considered. 

I  know  of  no  English  writer  on  the  Physiocrats  or  their 
doctrines  who  seems  to  have  understood  them  or  to  have 
had  any  glimmering  that  the  truth  which  lay  behind  their 
theory  that  agriculture  is  the  only  productive  occupation 
was  an  apprehension  of  what  has  since  been  known  as 
the  Ricardian  doctrine  of  rent,  carried  out  further  than 
Ricardo  carried  it,  to  its  logical  results ;  but  apprehended, 
as  indeed  Ricardo  himself  seems  to  have  apprehended  it, 
only  in  its  relations  to  agriculture. 

In  "  Progress  and  Poverty,"  after  working  out  what  I 
believe  to  be  the  simple  yet  sovereign  remedy  for  the  con- 
tinuance of  wide-spread  poverty  amid  material  progress,  I 
thus,  in  the  chapter  entitled  "Indorsements  and  Objec- 
tions" (Book  VIII.,  Chapter  IV.),  refer  to  the  Physiocrats : 

In  fact,  that  rent  should,  both  on  grounds  of  expediency  and  jus- 
tice, be  the  peculiar  subject  of  taxation,  is  involved  in  the  accepted 
doctrine  of  rent,  and  may  be  found  in  embryo  in  the  works  of  all 
economists  who  have  accepted  the  law  of  Eicardo.  That  these  prin- 
ciples have  not  been  pushed  to  their  necessary  conclusions,  as  I  have 
pushed  them,  evidently  arises  from  the  indisposition  to  endanger  or 
offend  the  enormous  interest  involved  in  private  ownership  in  land, 
and  from  the  false  theories  in  regard  to  wages  and  the  cause  of  pov- 
erty which  have  dominated  economic  thought. 

But  there  has  been  a  school  of  economists  who  plainly  perceived, 
what  is  clear  to  the  natural  perceptions  of  men  when  uninfluenced 
by  habit — that  the  revenues  of  the  common  property,  land,  ought  to 
be  appropriated  to  the  common  service.  The  French  Economists  of 
the  last  century,  headed  by  Quesnay  and  Turgot,  proposed  just  what 


Chap.  IV.  THE  FRENCH  PHYSIOCRATS.  155 

I  have  proposed,  that  all  taxation  should  be  abolished  save  a  tax  upon  * 
the  value  of  land.  As  I  am  acquainted  with  the  doctrines  of  Ques- 
nay  and  his  disciples  only  at  second  hand  through  the  medium  of  the 
English  writers,  I  am  unable  to  say  how  far  his  peculiar  ideas  as  to 
agriculture  being  the  only  productive  avocation,  etc.,  are  erroneous 
apprehensions,  or  mere  peculiarities  of  terminology.  But  of  this  I 
am  certain  from  the  proposition  in  which  his  theory  culminated — that 
he  saw  the  fundamental  relation  between  land  and  labor  which  has 
since  been  lost  sight  of,  and  that  he  arrived  at  practical  truth,  though, 
it  may  be,  through  a  course  of  defectively  expressed  reasoning. 
The  causes  which  leave  in  the  hands  of  the  landlord  a  "produce 
net"  were  by  the  Physiocrats  no  better  explained  than  the  suc- 
tion of  a  pump  was  explained  by  the  assumption  that  nature  abhors 
a  vacuum ;  but  the  fact  in  its  practical  relations  to  social  economy 
was  recognized,  and  the  benefit  which  would  result  from  the  perfect 
freedom  given  to  industry  and  trade  by  a  substitution  of  a  tax  on 
rent  for  all  the  impositions  which  hamper  and  distort  the  application 
of  labor,  was  doubtless  as  clearly  seen  by  them  as  it  is  by  me.  One 
of  the  things  most  to  be  regretted  about  the  French  Revolution  is 
that  it  overwhelmed  the  ideas  of  the  Economists,  just  as  they  were 
gaining  strength  among  the  thinking  classes,  and  were  apparently 
about  to  influence  fiscal  legislation. 

Without  knowing  anything  of  Quesnay  or  his  doctrines,  I  have 
reached  the  same  practical  conclusion  by  a  route  which  cannot  be 
disputed,  and  have  based  it  on  grounds  which  cannot  be  questioned 
by  the  accepted  political  economy. 

The  best  English  account  of  the  Physiocratic  views  that 
I  now  know  of  is  that  given  by  Henry  Dunning  Macleod, 
in  his  "Elements  of  Economics"  (1881).  He  seems  to 
have  no  notion  of  the  truth  that  lay  at  the  bottom  of  a 
mistake  that  has  caused  their  great  services  to  be  all  but 
forgotten,  and  which  I  shall  take  opportunity  in  a  subse- 
quent book  more  fully  to  explain.  To  him  it  is  "  simply 
incomprehensible  how  men  of  the  ability  of  the  Physio- 
crats could  maintain  that  a  country  could  not  be  enriched 
by  the  labor  of  artisans  and  by  commerce."  This  he  styles 
"  one  of  those  aberrations  of  the  human  intellect  which  we 
can  only  wonder  at  and  not  explain."  But  nevertheless 
he  awards  them  the  honor  of  being  the  founders  of  the 


156  THE  NATURE  OF  WEALTH.  Book  II. 

science  of  political  economy,  declares  that  in  spite  of  their 
errors  "  they  are  entitled  to  imperishable  glory  in  the  his- 
tory of  mankind/'  and  gives  in  his  own  language  an  out- 
line of  their  doctrine,  from  which  (Book  I.,  Chapter  V., 
Sec.  3)  I  take  the  following : 

The  Creator  has  placed  man  upon  the  earth  with  the  evident  in- 
tention that  the  race  should  prosper,  and  there  are  certain  physical 
and  moral  laws  which  conduce  in  the  highest  degree  to  ensure  his 
preservation,  increase,  well-being,  and  improvement.  The  correla- 
tion between  these  physical  and  moral  laws  is  so  close  that  if  either 
be  misunderstood,  through  ignorance  or  passion,  the  others  are  also. 
Physical  nature,  or  matter,  bears  to  mankind  very  much  the  relation 
which  the  body  does  to  the  soul.  Hence  the  perpetual  and  necessary 
relation  of  physical  and  moral  good  and  evil  on  each  other. 

Natural  /justice  is  the  conformity  of  human  laws  and  actions  to 
natural  order,  aruLthis  collection  of  physical  and  moral  laws  existed 
before  any  positive  institutions  among  men.  And  while  their  obser- 
vance produces"  the  highest  degree  of  prosperity  and  well-being 
among  men,  the  non-observance  or  transgression  of  them  is  the  cause 
of  the  extensive  physical  evils  which  afflict  mankind. 

If  such  a  natural  law  exists,  our  intelligence  is  capable  of  under- 
standing it ;  for,  if  not,  it  would  be  useless,  and  the  sagacity  of  the 
Creator  would  be  at  fault.  As,  therefore,  these  laws  are  instituted 
*>  by  the  Supremfi,Being,  all  men  and  all  states  ought  to  be  governed 
by  them.  They  are  immutable  and  irrefragable,  and  the  best  possi- 
ble laws  :  therefore  necessarily  the  basis  of  the  most  perfect  govern- 
ment, and  the  fundamental  rule  of  all  positive  laws,  which  are  only 
for  the  purpose  of  upholding  natural  order,  evidently  the  most 
advantageous  for  the  human  race. 

The  evident  object  of  the  Creator  being  the  preservation,  the  in- 
crease, the  well-being,  and  the  improvement  of  the  race,  man  neces- 
sarily received  from  his  origin  not  only  intelligence,  but  instincts 
s**  conformable  to  that  end.  Every  one  feels  himself  endowed  with  the 
triple  instincts  of  well-being,  sociability,  and  justice.  He  understands 
that  the  isolation  of  the  brute  is  not  suitable"  to  his  double  nature, 
and  that  his  physical  and  moral  wants  urge  him  to  live  in  the  society 
of  his  equals  in  a  state  of  peace,  good-will,  and  concord. 

He  also  recognizes  that  other  men,  having  the  same  wants  as  him- 
self, cannot  have  less  rights  than  himself,  and  therefore  he  is  bound 
to  respect  this  right,  so  that  other  men  may  observe  a  similar  obli- 
gation towards  him. 


Chap.  IF.  THE  FRENCH  PHYSIOCRATS.  157 

These  ideas— the  product  of  reason,  the  necessity  of  work,  the 
necessity  of  society,  and  the  necessity  of  justice— imply  three  others 
—liberty,  property,  and  authority,  which  are  the  three  essential  terms 
of  all  social  order. 

How  could  man  understand  the  necessity  of  labor  to  obey  the  ir- 
resistible instinct  of  his  preservation  and  well-being,  without  con- 
ceiving at  the  same  time  that  the  instrument  of  labor,  the  physical 
and  intellectual  qualities  with  which  he  is  endowed  by  nature,  be- 
longs to  him  exclusively,  without  perceiving  that  he  is  master  and 
the  absolute  proprietor  of  his  person,  that  he  is  born  and  should  re- 
main free? 

But  the  idea  of  liberty  cannot  spring  up  in  the  mind  without  asso- 
ciating with  it  that  of  property,  in  the  absence  of  which  the  first 
would  only  represent  an  illusory 'right,  without  an  object.  The  free- 
dom the  individual  has  of  acquiring  useful  things  by  labor  supposes 
necessarily  that  of  preserving  them,  of  enjoying  them,  and  of  dispos- 
ing of  them  without  reserve,  and  also  of  bequeathing  them  to  his 
family,  who  prolong  his  existence  indefinitely.  Thus  liberty  con- 
ceived in  this  manner  becomes  property,  which  may  be  conceived  in 
two  aspects  as  it  regards  movable  goods  on  the  earth,  which  is  the 
source  from  which  labor  ought  to  draw  them. 

At  first  property  was  principally  movable ;  but  when  the  cultiva- 
tion of  the  earth  was  necessary  for  the  preservation,  increase,  and 
improvement  of  the  race,  individual  appropriation  of  the  soil  became 
necessary,  because  no  other  system  is  so  proper  to  draw  from  the 
earth  all  the  mass  of  utilities  it  can  produce ;  and,  secondly,  because 
the  collective  constitution  of  property  would  have  produced  many 
inconveniences  as  to  sharing  of  the  fruits,  which  would  not  arise  •*** 
from  the  division  of  the  land,  by  which  the  rights  of  each  are  fixed 
in  a  clear  and  definite  manner.  Property  in  land,  therefore,  is  the 
necessary  and  legitimate  consequence  of  personal  and  movable  prop-  "~ 
erty.  Every  man  has,  then,  centered  in  him  by  the  laws  of  Provi- 
dence, certain  rights  and  duties ;  the  right  of  enjoying  himself  to  the 
utmost  of  his  capacity,  and  the  duty  of  respecting  similar  rights  in 
others.  The  perfect  respect  and  protection  of  reciprocal  rights  and 
duties  conduces  to  production  in  the  highest  degree,  and  the  obtain- 
ing the  greatest  amount  of  physical  enjoyments. 

The  Physiocrats,  then,  placed  absolute  freedom,  or  property— as 
the  fundamental  right  of  man— freedom  of  Person,  freedom  of  Opin- 
ion, and  freedom  of  Contract,  or  Exchange ;  and  the  violation  of 
these  as  contrary  to  the  law  of  Providence,  and  therefore  the  cause 
of  all  evil  to  man.  Quesnay's  first  publication,  "Le  Droit  Naturel," 


158  THE  NATURE  OF  WEALTH.  Book  II. 

contains  an  inquiry  into  these  natural  rights ;  and  he  afterwards,  in 
another  called  "  General  Maxims  of  the  Economical  Government  of 
an  Agricultural  Kingdom,"  endeavored  to  lay  down  in  a  series  of 
thirty  maxims,  or  fundamental  general  principles,  the  whole  bases 
of  the  economy  of  society.  The  23d  of  these  declares  that  a  nation 
suffers  no  loss  by  trading  with  foreigners.  The  24th  declares  the 
fallacy  of  the  doctrine  of  the  balance  of  trade.  The  25th  says  :  "Let 
entire  freedom  of  commerce  be  maintained;  for  the  regulation  of 
commerce,  both  internal  and  external,  the  most  sure,  the  most  true, 
the  most  profitable  to  the  nation  and  to  the  state,  exists  in  entire 
freedom  of  competition."  In  these  three  maxims,  which  Quesnay 
and  his  followers  developed,  was  contained  the  entire  overthrow  of 
the  existing  system  of  Political  Economy ;  and  notwithstanding  cer- 
tain errors  and  shortcomings,  they  are  unquestionably  entitled  to  be 
considered  as  the  founders  of  the  science  of  Political  Economy. 

Wealth,  in  the  economic  sense  of  the  wealth  of  societies, 
or  the  wealth  of  nations,  Macleod  goes  on  to  state,  the 
Physiocrats  held  to  consist  exclusively  of  material  things, 
drawn  from  land— to  man  the  source  of  all  material  things 
—by  the  exertion  of  labor,  and  possessing  value  in  ex- 
change, or  exchangeability ;  a  distinction  which  they  recog- 
nized as  essentially  different  from,  and  not  necessarily 
associated  with,  value  in  use  or  usefulness.  That  man 
can  neither  create  nor  annihilate  matter  they  repeated 
again  and  again  in  such  phrases  as:  "Man  can  create 
nothing,"  and  "  Nothing  can  come  out  of  nothing."  They 
expressly  excluded  land  itself  and  labor  itself,  and  all 
personal  capacities  and  powers  and  services,  from  the 
category  of  wealth,  and  were  far  ahead  of  their  time  in 
deriving  the  essential  quality  of  money  from  its  use  in 
serving  as  a  medium  of  exchange,  and  in  including  all 
usury  laws  in  the  restrictions  that  they  would  sweep 
away. 

That  these  men  rose  in  France,  and  as  it  were  in  the 
very  palace  of  the  absolute  king,  just  as  the  rotten  Bour- 
bon dynasty  was  hastening  to  its  fall,  is  one  of  the  most 
striking  of  the  paradoxes  with  which  history  abounds. 


Chap.  IF.  THE  FRENCH  PHYSIOCRATS.  169 

Never,  before  nor  since,  out  of  the  night  of  despotism 
gleamed  there  such  clear  light  of  liberty. 

They  were  deluded  by  the  idea— the  only  possibility  in 
fact,  under  existing  conditions  of  carrying  their  views  into 
effect  in  their  time— that  the  power  of  a  king  whose  pre- 
decessor had  said,  "  I  am  the  state !  "  might  be  utilized  to 
break  the  power  of  other  special  interests,  and  to  bring  lib- 
erty and  plenty  to  France,  and  through  France  to  the  world. 

They  had  their  day  of  hope,  and  almost  it  must  have 
seemed  of  assured  triumph,  when  in  1774,  three  months 
before  Quesnay's  death,  Turgot  was  made  Finance  Minister 
of  Louis  XVI.,  and  at  once  began  clearing  the  ways  by 
cutting  the  restrictions  that  were  stifling  French  industry. 
But  they  leaned  on  a  reed.  Turgot  was  removed.  His 
reforms  were  stopped.  The  pent-up  misery  of  the  masses, 
which  they  had  been  so  largely  instrumental  in  showing 
utterly  repugnant  to  the  natural  order,  burst  into  the  blind 
madness  of  the  great  revolution.  The  Physiocrats  were 
overthrown,  many  of  them  perishing  on  the  guillotine,  in 
prison  or  in  exile.  In  the  reaction  which  the  excesses  of 
that  revolution  everywhere  produced  among  those  most 
influencing  thought,  the  propertied  and  the  powerful,  the 
Physiocrats  were  remembered  merely  by  their  unfortunate 
misapprehension  in  regarding  agriculture  as  the  only  pro- 
ductive occupation. 

France  will  some  day  honor  among  the  noblest  the  cen- 
turies have  given  her  the  names  of  Quesnay,  and  Gournay, 
and  Turgot,  and  Mirabeau,  and  Condorcet,  and  Dupont, 
and  their  fellows,  as  we  shall  have  in  English,  intelligent 
explanations,  if  not  translations  of  their  works.  But, 
probably  for  the  reason  that  France  has  as  yet  felt  less 
than  the  English  and  Teutonic  and  Scandinavian  nations 
the  influence  of  the  new  philosophy  of  the  natural  order, 
best  known  as  the  Single  Tax,  the  teachings  of  these  men 
seem  at  present,  even  in  France,  to  be  practically  forgotten. 


CHAPTER  V. 
ADAM  SMITH  AND  THE  PHYSIOCRATS. 

SHOWING  THE  RELATION  BETWEEN  ADAM  SMITH  AND  THE 
PHYSIOCRATS. 

Smith  and  Quesnay— The  "Wealth  of  Nations"  and  Physiocratic 
ideas— Smith's  criticism  of  the  Physiocrats— His  failure  to  ap- 
preciate the  single  tax— His  prudence. 

ON  the  continental  trip  he  made  between  1764  and 
1766,  after  resigning  his  Glasgow  professorship  of 
moral  philosophy  to  accompany  as  tutor  the  young  Duke  of 
Buccleuch,  Adam  Smith  made  the  personal  acquaintance 
of  Quesnay  and  some  of  the  "  men  of  great  learning  and 
ingenuity,"  who  regarded  the  "King's  Thinker"  with  an 
admiration  "not  inferior  to  that  of  any  of  the  ancient 
philosophers  for  the  founders  of  their  respective  systems," 
and  was,  while  in  Paris,  a  frequent  and  welcome  visitor  at 
the  apartments  in  the  palace,  where,  unmindful  of  the 
gaieties  and  intrigues  of  the  most  splendid  and  corrupt 
court  of  Europe  that  went  on  but  a  floor  below  them,  this 
remarkable  group  discussed  matters  of  the  highest  and 
most  permanent  interest  to  mankind. 

This  must  have  been  a  fruitful  time  in  Adam  Smith's 
intellectual  life.  During  this  time  the  almost  unknown 
Scottish  tutor,  notable  among  his  few  acquaintances  for 
his  fits  of  abstraction,  must  have  been  mentally  occupied 

160 


Chap.V.  SMITH  AND  THE  PHYSIOCRATS.  161 

with  the  work  which  ten  years  after  was  to  begin  a  fame 
that  for  more  than  a  century  has  kept  him  at  the  very  head 
of  economic  philosophers  and  in  the  first  rank  of  the  per- 
manently illustrious  men  of  his  generation. 

Upon  this  work  he  entered  immediately  after  his  return 
from  the  continent,  in  the  leisure  afforded  him  by  the 
ample  pension  that  the  trustees  of  the  Duke  had  agreed 
should  continue  until  he  could  be  provided  with  a  profit- 
able government  place.  The  Duke  himself,  on  coming  to 
his  majority  and  estates,  seems  to  have  made  no  effort  to 
release  himself  from  this  payment  by  securing  such  a 
place  for  the  man  whom  he  always  continued  to  regard 
with  respect  and  affection,  thinking  doubtless  that  its 
duties,  however  nearly  nominal,  might  somewhat  interfere 
with  his  freedom  to  devote  himself  to  his  long  work.  And 
when,  the  "  Wealth  of  Nations  "  having  been  at  last  pub- 
lished, its  author  was  appointed  by  Lord  North  to  be  one 
of  the  Commissioners  of  Customs  in  Scotland— an  appoint- 
ment which  seems  to  have  been  due  to  the  gratitude  of  the 
Premier  for  hints  received  from  that  book  as  to  new 
sources  of  taxation  rather  than  to  any  pressure  of  the 
Buccleuch  interest,  and  which  raised  the  simple-mannered 
student  to  comparative  opulence— the  Duke  insisted  on 
making  no  change  in  his  payment,  but  continued  the 
pension  for  life. 

The  "  liberal  and  generous  system  "  of  the  French  Econ- 
omists could  not  fail  to  appeal  powerfully  to  a  man  of 
Adam  Smith's  disposition,  and  the  "  Wealth  of  Nations  " 
bears  ample  evidence  of  the  depth  of  the  opinion  he  in  one 
place  expresses  in  terms,  that  this  system,  "with  all  its 
imperfections,  is  perhaps  the  nearest  approximation  to  the 
truth  that  has  yet  been  published  upon  the  subject  of 
political  economy."  It  was  indeed  his  original  intention 
as  stated  to  his  friend  and  biographer,  Professor  Dugald 
Stewart,  to  dedicate  to  Quesnay  the  fruits  of  his  ten  years' 


162  THE  NATURE  OF  WEALTH.  Book  II. 

application.  But  the  French  philosopher  died  in  1774, 
two  years  before  the  Scotsman's  great  work  saw  the  light. 
Thus  it  appeared  without  any  indication  of  an  intention 
which,  had  it  been  expressed,  might,  in  the  bitter  prejudice 
soon  afterwards  aroused  against  the  Physiocrats  by  the 
outbreak  of  the  French  Revolution,  have  seriously  mili- 
tated against  its  usefulness. 

The  resemblance  of  the  views  expressed  in  this  work  to 
those  held  by  the  Physiocrats  has,  however,  been  noticed 
by  all  critics,  and  both  on  the  side  of  their  opponents  and 
their  advocates  there  have  not  been  wanting  intimations 
that  Smith  borrowed  from  them.  But  while  he  must  have 
been  eminently  ready  to  absorb  any  idea  that  commended 
itself  to  his  mind,  there  is  no  reason  to  regard  these  views 
as  not  originally  Adam  Smith's  own.  The  keenness  of 
observation  and  analysis,  the  vigor  of  imagination  and 
solidity  of  learning,  that  characterize  the  "  Wealth  of  Na- 
tions "  are  shown  in  the  "  Theory  of  the  Moral  Sentiments/7 
written  before  Smith  had  left  the  University  of  Glasgow, 
and  which  indeed  led  to  the  invitation  that  he  should  ac- 
company the  young  nobleman  on  his  trip.  They  are  shown 
as  well  in  the  paper  on  the  formation  of  languages,  and 
the  papers  on  the  principles  which  lead  and  direct  philo- 
sophical inquiry,  as  illustrated  in  the  history  of  various 
sciences,  which  are  usually  published  with  that  work.  It 
appears  from  the  "  Theory  of  the  Moral  Sentiments  n  that 
Adam  Smith  was  even  then  meditating  some  such  a  book 
as  the  "  Wealth  of  Nations,"  and  there  is  no  reason  to 
suppose  that  without  knowledge  of  the  Physiocrats  it 
would  have  been  essentially  different. 

It  is  a  mistake  to  which  the  critics  who  are  themselves 
mere  compilers  are  liable,  to  think  that  men  must  draw 
from  one  another  to  see  the  same  truths  or  to  fall  into  the 
same  errors.  Truth  is,  in  fact,  a  relation  of  things,  which 
is  to  be  seen  independently  because  it  exists  independently. 


Cliap.V.  SMITH  AND  THE  PHYSIOCRATS.  163 

Error  is  perhaps  more  likely  to  indicate  transmission  from 
mind  to  mind;  yet  even  that  usually  gains  its  strength 
and  permanence  from  misapprehensions  that  in  them- 
selves have  independent  plausibility.  Such  relations  of 
the  stars  as  that  appearance  in  the  north  which  we  call 
the  Dipper  or  Great  Bear,  or  as  that  in  the  south  which 
we  call  the  Southern  Cross,  are  seen  by  all  who  scan  the 
starry  heavens,  though  the  names  by  which  men  know 
them  are  various.  And  to  think  that  the  sun  revolves 
around  the  earth  is  an  error  into  which  the  testimony  of 
their  senses  must  cause  all  men  independently  to  fall, 
until  the  first  testimony  of  the  senses  is  corrected  by 
reason  applied  to  wider  observations. 

In  what  is  most  important,  I  have  come  closer  to  the 
views  of  Quesnay  and  his  followers  than  did  Adam  Smith, 
who  knew  the  men  personally.  But  in  my  case  there  was 
certainly  no  derivation  from  them.  I  well  recall  the  day 
when,  checking  my  horse  on  a  rise  that  overlooks  San 
Francisco  Bay,  the  commonplace  reply  of  a  passing  team- 
ster to  a  commonplace  question,  crystallized,  as  by  light- 
ning-flash, my  brooding  thoughts  into  coherency,  and  I 
there  and  then  recognized  the  natural  order— one  of  those 
experiences  that  make  those  who  have  had  them  feel  there, 
after  that  they  can  vaguely  appreciate  what  mystics  and 
poets  have  called  the  "  ecstatic  vision."  Yet  at  that  time 
I  had  never  heard  of  the  Physiocrats,  or  even  read  a  line 
of  Adam  Smith. 

Afterwards,  with  the  great  idea  of  the  natural  order  in 
my  head,  I  printed  a  little  book,  U0ur  Land  and  Land 
Policy,"  in  which  I  urged  that  all  taxes  should  be  laid  on 
the  value  of  land,  irrespective  of  improvements.  Casually 
meeting  on  a  San  Francisco  street  a  scholarly  lawyer, 
A.  B.  Douthitt,  we  stopped  to  chat,  and  he  told  me  that 
what  I  had  in  my  little  book  proposed  was  what  the  French 
"  Economists  "  a  hundred  years  before  had  proposed. 


/$ 


OF  THE 

I  UNIVERSITY 


164  THE  NATURE  OF  WEALTH.  Boole  II. 

I  forget  many  things,  but  the  place  where  I  heard  this, 
and  the  tones  and  attitude  of  the  man  who  told  me  of  it, 
are  photographed  on  my  memory.  For,  when  you  have 
seen  a  truth  that  those  around  you  do  not  see,  it  is  one  of 
the  deepest  of  pleasures  to  hear  of  others  who  have  seen 
it.  This  is  true  even  though  these  others  were  dead  years 
before  you  were  born.  For  the  stars  that  we  of  to-day  see 
when  we  look  were  here  to  be  seen  hundreds  and  thou- 
sands of  years  ago.  They  shine  on.  Men  come  and  go, 
in  their  generations,  like  the  generations  of  the  ants. 

This  pleasure  of  a  common  appreciation  of  truth  not  yet 
often  accepted,  Adam  Smith  must  have  had  from  his  in- 
tercourse with  the  Physiocrats.  Widely  as  he  and  they 
may  have  differed,  there  was  yet  much  that  was  common 
in  their  thought.  He  was  a  free  trader  as  they  were, 
though  perhaps  not  so  logical  and  thorough-going.  And 
though  differing  in  temper  and  widely  differing  in  condi- 
tions, both  were  bent  on  struggling  against  what  must 
have  seemed  at  the  time  insuperable  difficulties. 

Adam  Smith's  knowledge  of,  and  admiration  for,  the 
Physiocrats  must  at  least  have  affected  his  thought  and 
expression,  sometimes  by  absorption  and  sometimes  per- 
haps by  reaction.  But  no  matter  how  much  of  his  eco- 
nomic views  were  original  with  him  and  how  much  he 
imbibed  consciously  or  unconsciously  from  them,  it  is 
certain  that  his  political  economy,  as  far  as  it  goes  on  all 
fours,  is  the  system  of  natural  order  proclaimed  by  them. 

What  Adam  Smith  meant  by  the  wealth  of  nations  is  in 
most  cases,  and  wherever  he  is  consistent,  the  material 
things  produced  from  land  by  labor  which  constitute  the 
necessities  and  conveniences  of  human  life ;  the  aggregate 
produce  of  society,  using  the  word  produce  as  expressive 
of  the  sum  of  material  results,  in  the  same  way  that  we 
speak  of  agricultural  produce,  of  factory  produce,  of  the 
produce  of  mines,  or  fisheries,  or  the  chase.  Now  this  is 


Chap.  V. 


SMITH  AND  THE   PHYSIOCRATS. 


165 


what  the  Physiocrats  meant  by  wealth,  or  as  they  some- 
times termed  it,  the  gross  product  of  land  and  labor. 

But  this  is  also,  as  I  shall  hereafter  show,  the  primary 
or  root  meaning  of  the  word  wealth  in  its  common  use. 
And  whoever  will  read  Smith's  "  Considerations  Concerning 
the  First  Formation  of  Languages,"  originally  published 
with  his  "Moral  Sentiments,"  in  1759,  will  see  from  his 
manner  of  tracing  words  to  their  primary  uses,  that  when- 
ever he  came  to  think  of  it,  he  would  have  recognized  the 
original  and  true  meaning  of  the  word  wealth  to  be  that 
of  the  necessities  and  conveniences  of  human  life,  brought 
into  being  by  the  exertion  of  labor  upon  land. 

The  difference  between  Smith  and  the  Physiocrats  is 
this :  vs 

The  Physiocrats,  on  their  part,  clearly  laid  down  and 
steadily  contended  that  nothing  that  did  not  have  material 
existence,  or  was  not  produced  from  land,  could  be  included 
in  the  category  of  the  wealth  of  society.  Adam  Smith,  how- 
ever, with  seeming  inadvertence,  has  fallen  in  places  into 
the  inconsistency  of  classing  personal  qualities  and  obliga- 
tions as  wealth.  This  is  probably  attributable  to  the  fact 
that  what  it  seemed  to  him  possible  to  accomplish  was 
much  less  than  what  the  Physiocrats  aimed  at.  The  task 
to  which  he  set  himself,  that  in  the  main  of  showing  the 
absurdity  and  impolicy  of  the  mercantile  or  protective 
system,  was  sufficiently  difficult  to  make  him  comparatively 
regardless  of  speculations  that  led  far  beyond  it.  With 
the  disproval  of  the  current  notion  that  the  wealth  of 
nations  consists  of  the  precious  metals,  his  care  as  to  what 
is  and  what  is  not  a  part  of  that  wealth  relaxed.  He  went 
with  the  Physiocrats  in  their  condemnation  of  the  attempts 
of  governments  to  check  commerce,  but  stopped  both 
where  they  had  carried  th3  idea  of  freeing  all  production 
from  tax  or  restraint  to  the  point  of  a  practical  proposi- 
tion, and  where  they  had  fallen  into  obvious  error.  He 


166  THE  NATURE  OF  WEALTH.  Boole  II. 

neither  proposed  the  single  tax  nor  did  he  fall  into  the 
mistake  of  declaring  agriculture  the  only  productive  occu- 
pation. That  there  is  a  natural  order  he  saw ;  and  that 
to  this  natural  order  our  perceptions  of  justice  conform, 
he  also  saw.  But  that  involved  in  this  natural  order  is  a 
^"provision  for  the  material  needs  of  advancing  society  he 
seems  never  to  have  seen. 

Whether  Adam  Smith's  failure  to  grasp  the  great  truth 
that  the  French  " Economists"  perceived,  though  "as 
through  a  glass,  darkly,"  was  due  to  their  erroneous  way 
of  stating  it,  or  to  some  of  those  environments  of  the 
individual  mind  which  seem  on  special  points  to  close  its 
powers  of  perception,  there  is  no  means  that  I  know  of  for 
determining.  Adam  Smith  saw  that  the  Physiocrats  must 
be  wrong  in  regarding  manufactures  and  exchanges  as 
sterile  occupations,  but  he  did  not  see  the  true  answer  to 
their  contention,  the  answer  that  would  have  brought  into 
the  light  of  a  larger  truth  that  portion  of  truth  they  had 
wrongly  apprehended.  The  answer  he  makes  to  them  in 
Book  IV.,  Chapter  IX.,  of  the  "  Wealth  of  Nations  "  could 
hardly  have  been  entirely  satisfactory  to  himself.  In  this 
he  does  not  venture  to  contend  that  the  labor  of  artificers, 
manufacturers  and  merchants  is  as  productive  of  wealth 
as  the  labor  of  agriculturists.  He  only  contends  that  it  is 
not  to  be  considered  as  utterly  sterile,  and  that  "  the  rev- 
enue of  a  trading  and  manufacturing  country  must,  other 
things  being  equal,  always  be  much  greater  than  that  of 
one  without  trade  and  manufactures,"  because  "  a  smaller 
quantity  of  manufactured  produce  purchases  a  great 
quantity  of  rude  produce."  That  he  himself,  indeed,  re- 
garded agriculture  as  at  least  the  most  productive  of  occu- 
pations is  shown  directly  in  other  places  in  his  great  work. 
And  there  is  one  part  of  this  answer  that  is  extremely 
unsatisfactory  and  utterly  out  of  its  author's  usual  temper. 
No  one  better  than  Adam  Smith  could  see  the  fallacy  of 


Chap.r.  SMITH  AND   THE  PHYSIOCRATS.  167 

comparing  a  philosopher  who  declared  that  the  political 
body  would  thrive  best  under  conditions  of  perfect  liberty 
and  perfect  justice  with  a  physician  who  "  imagined  that 
the  health  of  the  human  body  could  be  preserved  only  by 
a  certain  precise  regimen  of  diet  and  exercise."  And  that 
he  should  resort  to  an  illustration  which  depended  for  its 
effect  upon  such  a  suppressio  veri  to  explain  or  emphasize 
his  dissent  from  a  man  whom  he  esteemed  so  highly  as 
Quesnay,  shows  a  latent  uncertainty.  Both  in  quality  and 
in  temper  of  mind,  Smith  seems  the  last  of  men  to  use  such 
an  argument  except  in  despair  of  finding  a  better  one. 

There  are  passages  in  the  "  Wealth  of  Nations  "  where 
Adam  Smith  checks  his  inquiry  with  a  suddenness  that 
shows  an  indisposition  to  venture  on  ground  that  the  pos- 
sessing classes  would  deem  dangerous.  But  in  nothing  he 
left  after  him  (just  before  his  death  he  destroyed  all  manu- 
scripts he  did  not  wish  published),  is  there  an  indication 
that  he  was  more  than  puzzled  by  the  attempt  of  the 
Physiocrats  to  explain  the  great  truth  that  they  saw  with 
wrong  apprehension.  He  clearly  perceived  that  "  the  prod- 
uce of  labor  constitutes  the  natural  recompense  or  wages 
of  labor/'  and  that  it  was  the  appropriation  of  land  that 
had  deprived  the  laborer  of  his  natural  due.  But  he  had 
evidently  never  looked  further  into  the  phenomena  of  rent 
than  to  see  that  "  the  landlords,  like  all  other  men,  love  to 
reap  where  they  never  sowed."  He  passes  over  the  great 
subject  of  the  relations  of  men  to  the  land  they  inhabit, 
as  though  the  appropriation  by  a  few  of  what  nature  has 
provided  as  the  dwelling-place  and  storehouse  of  all  must 
now  be  accepted  as  if  it  were  a  part  of  the  natural  order. 
And  so,  indeed,  in  his  times  and  conditions  it  must  have 
appeared  to  him. 

Even  if  Adam  Smith  had  seen  the  place  of  the  single 
tax  in  the  natural  order,  as  the  natural  means  for  the 
supply  of  the  natural  needs  of  civilized  societies,  prudence 


168  THE  NATURE  OF  WEALTH.  Bookll. 

might  well  have  suggested  that  his  inquiry  should  not  be 
carried  so  far.  I  mean,  not  merely  that  prudence  of  the 
individual  which  impelled  Copernicus  to  withhold  until 
after  his  death  any  publication  of  his  discovery  of  the 
movement  of  the  earth  about  the  sun ;  but  that  prudence 
of  the  philosopher  which,  from  a  desire  to  do  the  utmost 
that  he  can  for  Truth  and  Justice  in  his  own  time,  may 
prevent  him  from  advancing  a  larger  measure  of  truth 
than  his  own  time  can  receive. 

In  that  part  of  the  eighteenth  century  when  the  Physio- 
crats dreamed  that  they  were  on  the  verge  of  carrying 
their  great  reform  and  Smith  wrote  painfully  his  "  Wealth 
of  Nations,"  there  was  a  wide  difference  between  the  con- 
ditions of  France  and  Scotland. 

Sheltered  under  the  friendship  of  a  king  whose  dynasty 
had  reduced  the  great  feudal  landlords  to  servitors  and 
courtiers;  seeking  with  the  aphorism,  "Poor  peasants, 
poor  kingdom  j  poor  kingdom,  poor  king,"  to  arouse  the 
strongest  power  in  the  state  to  the  relief  of  the  most 
downtrodden  j  cherishing  the  hope  that  the  emancipation 
of  man  might  be  accomplished  by  the  short  and  royal  road 
of  winning  the  mind  and  conscience  of  a  young  and  ami- 
able sovereign,  the  French  philosophers  might  have  some 
prospect  of  getting  a  hearing  in  their  advocacy  of  the 
single  tax.  But,  on  the  other  side  of  the  Channel,  the 
"landed  interest,"  gorged  with  the  spoil  of  Church  and 
Crown  and  peasants  and  clansmen,  reigned  supreme.  For 
a  solitary  man  of  letters  to  have  attacked  this  supreme 
power  in  front  would  have  been  foolishness. 

That  Adam  Smith,  "all-round  man"  that  he  was,  pos- 
sessed both  the  prudence  of  the  man  and  the  prudence  of 
the  philosopher,  is  shown  by  the  fact  that  he  managed  to 
do  what  he  did,  without  arousing  in  greater  degree  the  ire 
of  the  defenders  of  vested  wrongs.  Whoever  will  intelli- 
gently read  the  "Wealth  of  Nations"  will  find  it  full  of 


Cliap.V.  SMITH  AND   THE  PHYSIOCRATS.  169 

radical  sentiment,  an  arsenal  from  which  lovers  of  liberty 
and  justice  may  still  draw  weapons  for  victories  remaining 
to  be  won.  Yet  its  author  was  a  college  professor,  travel- 
ing tutor  of  a  duke,  held  a  lucrative  government  position 
and  died  Lord  Rector  of  Glasgow  University. 

For  the  present  times  at  least,  the  Scotsman  succeeded 
where  the  Frenchman  failed.  It  is  he,  not  Quesnay,  who 
has  come  down  to  us  as  the  "  father  of  political  economy." 

This  position  is  recognized  even  by  economists  who  differ 
from  what  they  deem  his  school.  Thus  Professor  James, 
of  the  University  of  Pennsylvania,  himself  belonging  to 
the  "new  school,"  says  of  Adam  Smith  in  the  article 
^Political  Economy"  in  Lalor's  Cyclopedia,  1884: 

All  theories  and  development  of  the  preceding  ages  culminate  in 
him,  all  lines  of  development  in  the  succeeding  ages  start  from  him. 
His  work  has  been  before  the  public  over  one  hundred  years,  and  yet 
no  second  book  has  been  produced  that  deserves  to  be  compared  with 
it  in  originality  and  importance.  The  subsequent  history  of  the 
science  is  mainly  the  history  of  attempts  to  broaden  and  deepen  the 
foundation  laid  by  Adam  Smith,  to  build  the  superstructure  higher 
and  render  it  more  solid. 

It  is  for  this  reason  that  I  take  Adam  Smith's  "Wealth 
of  Nations"  as  the  great  landmark  in  the  history  of 
Political  Economy. 


CHAPTER  VI. 
SMITH'S  INFLUENCE  ON  POLITICAL  ECONOMY. 

SHOWING  WHAT  THE  "  WEALTH  OP  NATIONS  "  ACCOMPLISHED 
AND  THE  COURSE  OF  THE  SUBSEQUENT  DEVELOPMENT  OF 
POLITICAL  ECONOMY. 

Smith,  a  philosopher,  who  addressed  the  cultured,  and  whose  attack 
on  mercantilism  rather  found  favor  with  the  powerful  landowners 
—Not  entirely  exempt  from  suspicion  of  radicalism,  yet  pardoned 
for  his  affiliation  with  the  Physiocrats— Efforts  of  Malthus  and 
Eicardo  on  respectabilizing  the  science— The  fight  against  the 
corn-laws  revealed  the  true  "beneficiaries  of  protection,  but  passed 
for  a  free-trade  victory,  and  much  strengthened  the  incoherent 
science— Confidence  of  its  scholastic  advocates— Say's  belief  in 
the  result  of  the  colleges  taking  up  political  economy — Torrens's 
confidence— Failure  of  other  countries  to  follow  England's  ex- 
ample—Cairnes  doubts  the  effect  of  making  it  a  scholastic  study 
— His  sagacity  proved  by  the  subsequent  breakdown  of  Smith's 
economy— The  true  reason. 

A  DAM  SMITH  was  not  a  propagandist  or  a  politician, 
JLA.  as  were  the  Physiocrats.  He  was  simply  a  philoso- 
pher, addressing  primarily  a  small,  comfortable  and  cul- 
tured class,  whose  sympathies  and  feelings  were  identified 
with  the  existing  social  order,  and  he  wielded  a  power 
which  requires  the  fruition  of  time  and  the  opening  of 
opportunity  for  its  culmination  in  action— a  power  which 
men  of  affairs  are  in  its  first  beginnings  apt  to  underrate. 
When  the  first  few  copies  of  my  "Progress  and  Pov- 
erty" were  printed  in  an  author's  edition  in  San  Francisco, 

170 


Chap.  VI.  ADAM  SMITH'S  INFLUENCE.  171 

a  large  landowner  (the  late  General  Beale,  proprietor  of 
the  Tejon  Ranch,  and  afterwards  United  States  Minister  to 
Austria),  sought  me  to  express  the  pleasure  with  which  he 
had  read  it  as  an  intellectual  performance.  This,  he  said, 
he  had  felt  at  liberty  to  enjoy,  for  to  speak  with  the  free- 
dom of  philosophic  frankness,  he  was  certain  my  work 
would  never  be  heard  of  by  those  whom  I  wished  it  to 
affect. 

In  the  same  way,  but  to  a  much  greater  degree,  the 
small  class  whom  alone  the  "Wealth  of  Nations"  could 
first  reach  were  able  to  enjoy  its  greatness  as  an  intellec- 
tual performance  that  widened  the  circle  of  thought.  Few 
of  them  were  disturbed  by  any  fear  of  its  ultimate  effect 
on  special  interests.  At  that  time  a  popular  press  was 
not  yet  in  existence,  and  books  of  this  kind  were  addressed 
only  to  the  "  superior  orders."  The  House  of  Commons, 
the  nominal  representative  of  the  unprivileged  in  Great 
Britain,  was  filled  by  the  appointees  of  the  great  land- 
owners j  and  the  oligarchy  that  ruled  in  the  British  Islands 
was  really  stronger  than  the  similar  class  under  the  abso- 
lute monarchy  of  France.  It  was  only  a  few  years  before 
the  publication  of  the  "Wealth  of  Nations"  that  the  land- 
lord's right  of  pit  and  gallows,  i.e.,  of  life  and  death,  had 
been  abolished  in  Scotland,  not  as  a  matter  of  justice,  but 
by  purchase,  as  a  matter  of  dynastic  expediency  j  and  work- 
men in  coal-pits  and  salt-works  were  still  virtually  slaves, 
being  formally  denied  the  right  of  habeas  corpus. 

Adam  Smith  had  avoided  arousing  antagonism  from  the 
landed  interests.  And  in  turning  the  aggressive  side  of 
the  new  science  against  the  mercantile  system,  as  he  styled 
what  has  since  been  known  as  the  protective  system,  he 
found  favor  with,  rather  than  excited  prejudice  among, 
the  cultured  class— the  only  class  to  which  such  a  book  as 
his  could  at  that  time  be  addressed.  Such  a  class,  under 
the  conditions  then  existing  in  Great  Britain,  is  apt  to  feel 


172  THE  NATURE  OF  WEALTH.  Book  II. 

contempt  tinged  with  anger  for  traders  beginning  to  aspire 
towards  sharing  the  power  and  place  of  "  born  masters  of 
the  soil."  Thus  the  indignation  with  which  he  speaks  of 
how  "  the  sneaking  arts  of  underling  tradesmen  are  erected 
into  political  maxims  for  the  conduct  of  a  great  empire," 
and  with  which  he  compares  "  the  capricious  ambition  of 
kings  and  ministers"— "the  violence  and  injustice  of  the 
rulers  of  mankind,  for  which,  perhaps,  the  nature  of  human 
affairs  can  scarce  afford  a  remedy,"  with  "  the  impertinent 
jealousy,  the  mean  rapacity,  the  monopolizing  spirit  of 
merchants  and  manufacturers  who  neither  are  nor  ought 
to  be  the  rulers  of  mankind,"  could  not  fail  to  strike  a 
sympathetic  chord  in  the  spirit  then  intellectually  as 
politically  dominant  in  Great  Britain.  This  would  render 
unnoticed  the  quiet  way  in  which  he  shows  that  "  superi- 
ority "of  birth  "  is  but  "  an  ancient  superiority  of  fortune  "  * 
and  attributes  the  difference  between  the  philosopher  and 
the  street  porter  to  the  difference  in  the  accidents  under 
which  they  have  been  placed. 

Yet  with  the  outbreak  of  the  French  Revolution  the 
radicalism  of  the  "  Wealth  of  Nations "  did  not  pass  en- 
tirely unnoticed.  A  note  appended  by  Dugald  Stewart,  in 
1810,  to  the  second  edition  of  the  biography  of  Adam 
Smith,  first  read  before  the  Royal  Society  of  Edinburgh 
in  1793,  explains  as  a  reason  why  he  had  in  the  first  edi- 
tion confined  himself  to  a  much  more  general  view  of  the 
"  Wealth  of  Nations  "  than  he  had  once  intended,  that : 

The  doctrine  of  a  free  trade  was  itself  represented  as  of  a  revolu- 
tionary tendency ;  and  some  who  had  formerly  prided  themselves  on 
an  intimacy  with  Mr.  Smith,  and  on  their  zeal  for  the  propagation 
of  his  liberal  system,  began  to  call  in  question  the  expediency  of 
subjecting  to  the  disputations  of  philosophers  the  arcana  of  state 
policy  and  the  unfathomable  wisdom  of  the  feudal  ages. 

*  "Wealth  of  Nations,"  Book  V.,  Chapter  II.,  Part  II. 


Chap.  VI.  ADAM  SMITH'S  INFLUENCE.  173 

And  William  Playfair,  in  his  annotated  edition  of  the 
"  Wealth  of  Nations  "  (London,  1805),  deems  it  necessary 
to  apologize  for  Smith's  sympathy  with  the  Physiocrats  by 
declaring  that  u  the  real  fact  is  that  Dr.  Smith,  as  well  as 
many  of  the  Economists  themselves,  was  ignorant  of  the 
secret  belonging  to  the  sect"— that  "  simply  pretending  to 
reduce  to  practice  the  Economical  Table,  they  were  silently 
laboring  to  overturn  the  thrones  of  Europe."  This  igno- 
rance, since  it  was  shared  at  the  same  time  by  "  a  monarch 
of  such  eminent  abilities  and  penetration"  as  the  great 
Frederick  of  Prussia,  Playfair  thinks  may  be  well  par- 
doned to  Dr.  Smith.  And  pardoned  it  was.  Or  rather 
the  objections  made  to  Dr.  Smith  on  the  score  of  radicalism 
attracted  so  little  attention  that  it  is  only  by  delving  in 
forgotten  literature  that  any  trace  of  them  can  be  found. 
The  larger  fact  is  that  Adam  Smith,  opening  the  study  of 
political  economy  at  a  lower  level  than  the  Physiocrats, 
found  less  resistance,  and  his  book  began  to  secure  so  per- 
manent a  recognition  for  the  new  science  that  its  continu- 
ance to  our  time  is  properly  traced  to  him  as  its  founder 
rather  than  to  them. 

In  1798,  five  years  after  Stewart  read  his  biography  of 
Smith  before  the  Royal  Society  of  Edinburgh,  and  eight 
years  after  the  author  of  the  "  Wealth  of  Nations,"  lament- 
ing with  his  last  breath  that  he  had  done  so  little,  was  laid 
to  rest  in  the  Edinburgh  Cannongate,  the  English  clergy- 
man Malthus  brought  forward  his  famous  theory  of  popu- 
lation. This  at  once,  like  "  a  long-felt  want,"  took  its  place 
in  the  crystallizing  system  of  political  economy  which 
Smith  had  brought  into  shape,  and  which,  if  it  was  lacking 
in  a  clear  and  consistent  definition  of  wealth,  was  not  on 
that  account  objectionable  to  the  spirit  of  the  learned  in- 
stitutions which  soon  began  to  make  its  teaching  a  func- 
tion of  their  official  faculties.  A  few  years  after  Malthus 
came  Ricardo,  to  correct  mistakes  into  which  Smith  had 


174  THE  NATURE  OF  WEALTH.  Book  II. 

fallen  as  to  the  nature  and  cause  of  rent,  and  to  formulate 
the  true  law  of  rent ;  but  to  do  this  by  laying  stress  on  the 
fact  that  rent  would  increase  as  the  necessities  of  increas- 
ing population  forced  cultivation  to  less  and  less  produc- 
tive land,  or  to  less  and  less  productive  points  on  the  same 
land. 

Thus,  the  theory  of  wages  into  which  Adam  Smith  fell 
when,  as  though  fearful  of  the  radical  conclusions  to  which 
it  must  lead,  he  suddenly  abandons  his  true  perception 
that  "  the  produce  of  labor  constitutes  the  natural  recom- 
pense or  wages  of  labor,"  to  consider  the  master  as  provid- 
ing from  his  capital  the  wages  of  his  workmen,  together 
with  the  theory  of  the  tendency  of  population  to  increase 
faster  than  subsistence,  and  the  apprehension  of  the 
theory  of  rent  as  resulting  from  the  forcing  of  exertion  to 
less  and  less  productive  land,  with  what  was  deemed  its 
corollary,  "  the  law  of  diminishing  productiveness  in  agri- 
culture," became  cardinal  doctrine.  These  linking  with 
and  buttressing  each  other,  in  what  soon  became  the  ac- 
cepted system  of  political  economy  as  developed  from  the 
"  Wealth  of  Nations,"  did  away  effectually  with  any  fear 
that  the  study  of  natural  laws  of  the  production  and  dis- 
tribution of  wealth  might  be  dangerous  to  the  great  House 
of  Have.  For  in  this  way  political  economy  was  made  to 
serve  the  purpose  of  an  assumed  scientific  demonstration 
that  the  shocking  contrasts  in  the  material  conditions  of 
men  which  our  advancing  civilization  presents,  result  not 
from  the  injustice  and  mistakes  of  human  law,  but  from 
the  immutable  law  of  Nature— the  decrees  of  the  All-origi- 
nating, All-maintaining  Spirit. 

So  far  from  showing  any  menace  to  the  great  special 
interests,  a  political  economy,  so  perverted,  soon  took  its 
place  with  a  similarly  perverted  Christianity  to  soothe  the 
conscience  of  the  rich  and  to  frown  down  discontent  on 
the  part  of  the  poor.  In  text-books  and  teachings  from 


Chap.  VI.  ADAM  SMITH'S  INFLUENCE.  175 

which  Adam  Smith's  recurring  perceptions  of  the  natural 
equality  of  men  were  eliminated,  it  became  indeed  "the 
dismal  science."  It  was  held  by  its  admirers  that  it  needed 
only  to  be  sufficiently  taught  them  to  convince  even  the 
"  lower  orders/7  that  things  as  they  are  are  things  as  they 
ought  to  be,  except  perhaps  that  "  the  monopolizing  spirit 
of  merchants  and  manufacturers,"  and  "  the  sneaking  arts 
of  underling  tradesmen "  should  no  longer  be  permitted 
to  be  erected  into  maxims  for  governmental  interferences 
with  trade. 

Thus  as  the  system  of  political  economy  presented  by 
Adam  Smith  began  to  attract  the  attention  of  the  thought- 
ful and  cultured,  it  did  not  meet  the  resistance  it  would 
have  encountered  had  the  special  interests  which  it  threat- 
ened been  really  those  of  the  growing  class  of  merchants 
and  manufacturers.  On  the  other  hand,  the  apparent 
turning  of  its  aggressive  side  against  merchants  and  manu- 
facturers prevented  the  powerful  landed  interest  from 
perceiving  fully  its  relation  to  their  own  monopoly  until 
it  had  gained  the  weight  of  recognized  philosophic  au- 
thority. 

Now  the  "course  of  social  development  in  the  civilized 
world  generally,  but  particularly  in  Great  Britain,  in  the 
era  of  steam  which  immediately  followed  Adam  Smith, 
was  enormously  to  increase  the  relative  social  weight  of 
the  mercantile  and  manufacturing  classes.  But  when, 
fifty  years  after  the  death  of  Adam  Smith,  what  he  called 
the  mercantile  system  came  into  political  issue  in  the 
agitation  for  the  repeal  of  the  corn-laws,  it  was  not  among 
merchants  and  manufacturers,  but  in  the  power  of  the 
landed  interest,  that  the  strong  defense  of  this  system 
was  seen  to  lie.  The  repeal  of  the  corn-laws  was  carried 
against  the  strenuous  resistance  of  the  landowners  by  a 
combination  of  merchants  and  manufacturers  with  the 
working-classes,  urged  by  bitter  discontent  and  growing 


176  THE  NATURE  OF  WEALTH.  Book  II. 

aspirations.  But  it  was  not  carried  until  it  became  evident 
to  the  more  thoughtful  that  if  the  agitation  went  on  it 
would  be  sure  to  lead  to  an  inquiry  into  the  right  by  which 
a  few  individuals  called  landowners,  claimed  the  land  of 
the  British  Islands  as  their  property. 

The  truth  is  that  merchants  and  manufacturers,  as 
merchants  and  manufacturers,  are  not  the  ultimate  bene- 
ficiaries of  the  protective  system,  and  that  mercantile 
interests  can  long  profit  by  it  only  when  sheltered  behind 
some  special  monopoly.  This  has  been  shown  in  the 
United  States,  where  the  owners  of  coal  and  mineral  and 
timber  and  sugar  land  have  constituted  the  backbone 
of  the  political  strength  that  has  carried  protection  to  such 
monstrous  length. 

The  repeal  of  the  English  corn-laws  passed  in  Great 
Britain  for  a  victory  of  free  trade  as  far  as  it  was  practicable 
to  carry  free  trade.  And  in  scholastic  circles  in  that  coun- 
try and  in  the  United  States,  and  throughout  the  civilized 
world  that  took  its  intellectual  impulse  from  England,  it 
greatly  increased  the  hopefulness  of  the  professed  econo- 
mists. 

Thus  strengthened  by  this  powerful  impulse,  there  con- 
tinued to  grow  up  under  the  sanction  and  development  of 
a  series  of  able  and  authoritatively  placed  men,  whose 
efforts  were  devoted  to  smoothing  away  difficulties  and 
covering  up  incongruities,  an  accredited  system  of  political 
economy  which  found  its  most  widely  accepted  expounder 
in  John  Stuart  Mill,  and  reached  perhaps  its  highest  point 
of  authority  in  scholastic  circles  about  or  shortly  after  the 
centennial  of  the  publication  of  the  "Wealth  of  Nations." 
Yet  it  was  as  wanting  in  coherence  as  the  image  that 
Nebuchadnezzar  saw  in  his  dream.  It  contained  much 
real  truth  well  worked  out.  But  this  was  conjoined  with 
fallacies  which  could  not  stand  examination.  The  attempt 
to  define  its  object-noun,  wealth,  and  the  sub-term  of 


Chap.  VI.  ADAM  SMITH'S  INFLUENCE.  177 

wealth,  capital,  made  them  much  more  indefinite  and 
confused  than  they  had  been  left  by  Adam  Smith.  And 
it  was  never  attempted  to  bring  together  what  were  given 
as  the  laws  of  the  distribution  of  wealth,  as  that  would 
have  shown  at  a  glance  their  want  of  relation. 

This  political  economy  had  no  real  hold  on  common 
thought,  and  was  regarded  even  by  ordinarily  intelligent 
men  as  a  scholastic  or  esoteric  science.  But  it  was  spoken 
of  by  its  professors  with  the  utmost  confidence  as  an 
assured  science,  and  their  belief  in  its  success  was  greatly 
increased. 

From  the  beginning  until  well  past  the  middle  of  the 
nineteenth  century  the  temper  of  the  recognized  expound- 
ers of  the  political  economy  which  took  shape  from  Adam 
Smith's  foundation  was  hopeful  and  confident.  They 
believed  they  had  hold  of  a  true  science,  which  needed 
only  development  to  be  universally  recognized. 

In  what  was  printed  as  the  introduction  to  the  first 
American  edition  of  Jean  Baptiste  Say's  treatise  on  polit- 
ical economy*— which  being  translated  into  English  and 
widely  circulated  on  both  sides  of  the  Atlantic  became  for 
a  long  time,  in  the  United  States  at  least,  perhaps  the  most 
popular  of  the  expositions  of  the  science  that  Adam  Smith 
had  founded— Say  points  out  certain  difficulties  that  polit- 
ical economy  must  have  to  encounter :  "  that  opinions  in 
political  economy  are  not  only  maintained  by  vanity,  but 
by  the  self-interest  enlisted  in  the  maintenance  of  a  vicious 
order  of  things ;  "  that  "  writers  are  found  who  possess  the 
lamentable  faculty  of  composing  articles  for  journals, 
pamphlets  and  even  whole  volumes  upon  subjects  which, 
according  to  their  own  confession,  they  do  not  under- 
stand j "  and  that  "  such  is  the  indifference  of  the  public 

*  The  original  work  was  published  in  1803.  But  this  introduction 
bears  internal  evidence  of  having  been  written  not  earlier  than  1814. 


178  THE  NATURE  OF  WEALTH.  Book  1 1. 

that  they  rather  prefer  trusting  to  assertions  than  be  at  the 
trouble  of  investigating  them." 
But  he  continues : 

Everything,  however,  announces  that  this  beautiful,  and  above 
all,  useful  science,  is  spreading  itself  with  increasing  rapidity.  Since 
it  has  been  perceived  that  it  does  not  rest  upon  hypothesis,  but  is 
founded  upon  observation  and  experience,  its  importance  has  been 
felt.  It  is  now  taught  wherever  knowledge  is  cherished.  In  the 
universities  of  Germany,  of  Scotland,  of  Spain,  of  Italy,  and  of  the 
north  of  Europe,  professorships  of  political  economy  are  already  es- 
tablished. Hereafter  this  science  will  be  taught  in  them,  with  all  the 
advantages  of  a  regular  and  systematic  study.  Whilst  the  Univer- 
sity of  Oxford  proceeds  in  her  old  and  beaten  track,  within  a  few 
years  that  of  Cambridge  has  established  a  chair  for  the  purpose  of 
imparting  instruction  in  this  new  science.  Courses  of  lectures  are 
delivered  in  Geneva  and  various  other  places ;  and  the  merchants  of 
Barcelona  have,  at  their  own  expense,  founded  a  professorship  on 
political  economy.  It  is  now  considered  as  forming  an  essential  part 
of  the  education  of  princes ;  and  those  who  are  called  to  that  high 
distinction  ought  to  blush  at  being  ignorant  of  its  principles.  The 
Emperor  of  Russia  has  desired  his  brothers,  the  Grand  Dukes  Nicho- 
las and  Michael,  to  pursue  a  course  of  study  on  this  subject  under 
the  direction  of  M.  Storch.  Finally,  the  Government  of  France  has 
done  itself  lasting  honor  by  establishing  in  this  kingdom,  under  the 
sanction  of  public  authority,  the  first  professorship  of  political 
economy. 

This  hopefulness  as  to  what  was  to  be  accomplished 
by  the  regular  and  systematic  study  of  political  economy 
pervaded  for  a  long  time  all  economic  writings.  Even 
when  it  was  necessary  to  admit  that  the  unanimity  that 
had  been  confidently  expected  had  not  come,  it  was  always 
just  about  to  come. 

Thus  Colonel  Torrens,  in  the  introduction  to  his  "  Essay 
on  the  Production  of  Wealth/'  says  in  1821 : 

In  the  progress  of  the  human  mind,  a  period  of  controversy  among 
the  cultivators  of  any  branch  of  science  must  necessarily  precede  the 
period  of  unanimity.  With  respect  to  political  economy,  the  period 


Chap.  VI.  ADAM  SMITH'S  INFLUENCE.  179 

of  controversy  is  passing  away,  and  that  of  unanimity  rapidly  ap- 
proaching. Twenty  years  hence  there  will  scarcely  exist  a  doubt 
respecting  any  of  its  fundamental  principles. 

With  the  great  defeat  of  protection  in  1846,  the  confi- 
dence of  political  economists  became  even  greater  than 
before.  But  the  predictions  that  the  example  of  Great 
Britain  in  abolishing  protective  duties  would  be  quickly 
followed  throughout  the  civilized  world— predictions  based 
on  the  assumption  that  this  partial  victory  for  freedom 
had  been  won  by  the  advance  of  an  intelligent  political 
economy,  were  not  realized;  and  fostered  by  such  tre- 
mendous political  events  as  the  great  fight  between  the 
American  States  and  the  Franco-German  war,  a  wave  of 
reaction  in  favor  of  protection  seemed  to  sweep  over  pretty 
nearly  all  the  civilized  world  outside  of  Great  Britain. 

And  while  in  the  scholastic  world,  of  the  English-speak- 
ing countries  at  least,  the  triumph  of  Adam  Smith's  oppo- 
sition to  the  principles  of  the  mercantile  system  seemed  to 
have  established  firmly  an  accepted  science  of  political 
economy,  and  chairs  for  its  teaching  formed  an  indispensa- 
ble adjunct  of  every  institution  of  education,  the  real  inco- 
herencies  which  had  been  slurred  over  began  more  and 
more  to  show  themselves. 

In  1856  Professor  J.  E.  Cairnes,  delivering  in  Dublin 
University  on  the  Whately  Foundation  a  series  of  lectures 
afterwards  reprinted  under  the  title  of  "The  Character 
and  Logical  Method  of  Political  Economy,"  quoted  what  he 
called  the  unlucky  prophecy  of  Torrens,  made  in  1821,  that 
the  period  of  controversy  had  passed  and  that  of  unanimity 
was  rapidly  approaching,  and  that  in  twenty  years  from 
then  there  would  scarcely  exist  a  doubt  respecting  any  of 
the  fundamental  principles  of  political  economy.  Professor 
Cairnes  did  this  only  to  give  point  to  a  statement  that  fun- 
damental questions  "are  still  vehemently  debated,  not 
merely  by  sciolists  and  smatterers,  who  may  always  be 


180  THE  NATURE  OF  WEALTH.  Book  II. 

expected  to  wrangle,  but  by  the  professed  cultivators  and 
recognized  expounders  of  the  science,"  and  that : 

So  far  from  the  period  of  controversy  having  passed,  it  seems 
hardly  yet  to  have  begun— controversy,  I  mean,  not  merely  respect- 
ing propositions  of  secondary  importance,  or  the  practical  application 
of  scientific  doctrines  (for  such  controversy  is  only  an  evidence  of  the 
vitality  of  a  science,  and  is  a  necessary  condition  of  its  progress),  but 
controversy  respecting  fundamental  principles  which  lie  at  the  root 
of  its  reasonings,  and  which  were  regarded  as  settled  when  Colonel 
Torrens  wrote. 

Cairnes  continues  with  a  passage,  which  as  showing  a 
perception  by  a  leading  professor  of  political  economy 
of  the  effect  of  the  establishment  of  professorships,  from 
which  Say  a  generation  before  had  hoped  so  much  and 
from  which  up  to  this  very  time  so  much  continued  as  it 
still  continues  to  be  hoped  by  those  who  know  no  better, 
is  worth  my  quoting : 

When  Political  Economy  had  nothing  to  recommend  it  to  public 
notice  but  its  own  proper  and  intrinsic  evidence,  no  man  professed 
himself  a  political  economist  who  had  not  conscientiously  studied 
and  mastered  its  elementary  principles ;  and  no  one  who  acknowledged 
himself  a  political  economist  discussed  an  economic  problem  without 
constant  reference  to  the  recognized  axioms  of  the  science.  But 
when  the  immense  success  of  free  trade  gave  experimental  proof  of 
the  justice  of  those  principles  on  which  economists  relied,  an  obser- 
vable change  took  place  both  in  the  mode  of  conducting  economic 
discussions  and  in  the  class  of  persons  who  attached  themselves  to 
the  cause  of  political  economy.  Many  now  enrolled  themselves  as 
political  economists  who  had  never  taken  the  trouble  to  study  the 
elementary  principles  of  the  science ;  and  some,  perhaps,  twhose 
capacities  did  not  enable  them  to  appreciate  its  evidence  ;  while  even 
those  who  had  mastered  its  doctrines,  in  their  anxiety  to  propitiate 
a  popular  audience,  were  too  often  led  to  abandon  the  true  grounds 
of  the  science,  in  order  to  find  for  it  in  the  facts  and  results  of  free 
trade  a  more  popular  and  striking  vindication.  It  was  as  if  mathe- 
maticians, in  order  to  attract  new  adherents  to  their  ranks,  had  con- 
sented to  abandon  the  method  of  analysis,  and  to  rest  the  truth  of 
their  formulas  on  the  correspondence  of  the  almanacs  with  astro- 


Chap.  VI.  ADAM  SMITH'S  INFLUENCE.  181 

nomical  events.  The  severe  and  logical  style  which  characterized  the 
cultivators  of  the  science  in  the  early  part  of  the  century  has  thus 
been  changed  to  suit  the  different  character  of  the  audience  to  whom 
economists  now  addressed  themselves.  The  discussions  of  Political 
Economy  have  been  constantly  assuming  more  of  a  statistical  char- 
acter ;  results  are  now  appealed  to  instead  of  principles ;  the  rules  of 
arithmetic  are  superseding  the  canons  of  inductive  reasoning ;  till  the 
true  course  of  investigation  has  been  well-nigh  forgotten,  and  Politi- 
cal Economy  seems  in  danger  of  realizing  the  fate  of  Atalanta. 

At  the  present  time  it  is  clearly  to  be  seen  that  the  worst 
fears  of  Cairnes  have  been  more  than  realized.  The  period 
of  controversy  instead  of  having  passed,  had  indeed,  it  has 
since  been  proved,  hardly  then  begun.  The  accelerating 
tendency  since  his  time  as  in  the  period  of  which  he  then 
spoke,  has  been  away  from,  not  towards,  uniformity ;  con- 
troversy has  become  incoherence,  and  what  he  then  thought 
to  be  the  science  of  political  economy  has  been  destroyed 
at  the  hands  of  its  own  professors. 

But  while  Cairnes  realized  the  true  drift  of  a  tendency 
that  most  of  his  contemporaries  did  not  understand,  and  saw 
the  real  effect  of  a  study  of  political  economy  for  the  pur- 
pose of  filling  professorships  and  writing  books,  he  did  not 
see  the  real  cause  which  so  much  faster  and  farther  than  he 
could  have  imagined  has  given  sober  reality  to  his  more 
than  half-rhetorical  prediction.  The  reason  of  the  con- 
stantly increasing  confusion  of  the  scholastic  political  econ- 
omy has  lain  in  the  failure  of  the  so-called  science  to  define 
its  subject-matter  or  object-noun.  Statistics  cannot  aid  us 
in  the  search  for  a  thing  until  we  know  what  it  is  we  want  to 
find.  It  is  the  Tower  of  Babel  over  again.  Men  who  at- 
tempt to  develop  a  science  of  the  production  and  distribu- 
tion of  wealth  without  first  deciding  what  they  mean  by 
wealth  cannot  understand  each  other  or  even  understand 
themselves. 


CHAPTER  VII. 

INEFFECTUAL   GROPINGS   TOWARD   A   DETER- 
MINATION OF  WEALTH. 

SHOWING    THE    OPPOSITION   TO    THE    SCHOLASTIC   ECONOMY 
BEFORE  "  PROGRESS  AND  POVERTY." 

Illogical  character  of  the  "Wealth  of  Nations"— Statements  of  nat- 
ural right— Spence,  Ogilvie,  Chalmers,  Wakefield,  Spencer,  Dove, 
Bisset— Vague  recognitions  of  natural  right— Protection  gave  rise 
to  no  political  economy  in  England,  but  did  elsewhere— Germany 
and  protectionist  political  economy  in  the  United  States— Diver- 
gence of  the  schools— Trade-unionism  in  socialism. 

THE  "  Wealth  of  Nations  "  won  great  vogue  by  its  strik- 
ing qualities  and  its  prudence  in  avoiding  antagonism 
with  landowners.  It  made  a  nucleus  around  which  the 
scholastic  classes  could  rally,  assuming  that  they  were 
teaching  a  science  of  political  economy,  without  seriously 
hurting  any  powerful  interest.  What  Smith  had  done 
was  after  all  an  evasion— a  settlement  which  left  the 
cardinal  principles  unsettled.  He  had  shown  how  greatly 
the  division  of  labor  increases  the  productiveness  of  labor, 
and  without  daring  to  go  too  far  had  shown  that  to  leave 
labor  unrestricted  would  increase  the  annual  product.  He 
had  in  short  turned  the  aggressive  side  of  the  science 
against  the  protective,  or,  as  he  styled  it,  the  mercantile 
system,  thus  putting  on  its  feet  a  political  economy  which 
taught  a  sort  of  free  trade  that  did  not  seriously  object  to 

182 


Cliap.VlI.  INEFFECTUAL  GKOPINGS.  183 

taxes  on  labor  and  the  products  of  labor  for  raising  the 
revenues  of  government. 

What  wealth,  or  its  sub-term,  capital,  was,  Smith  did 
not  really  say,  nor  yet  did  he  make  clear  the  division  of 
their  joint  produce  between  the  human  factor  and  the 
natural  factor,  nor  venture  to  show  what  was  the  cause 
and  warrant  of  poverty.  In  political  economy  as  he  left 
it  there  were  no  axioms— nothing  that  would  correlate  and 
hold  together.  But  such  was  his  genius  and  prudence,  and 
his  adaptability  to  the  temper  of  his  time,  that  he  got  a 
hearing  where  more  daring  thinkers  failed,  and  a  science 
of  political  economy  began  to  grow  on  his  foundations. 
Malthus  by  giving  a  scientific  semblance  to  a  delusion 
which  tallied  with  popular  impressions,  and  Ricardo  by 
giving  form  to  a  scientific  interpretation  of  rent,  soon 
provided  what  passed  for  axioms,  one  of  which  was  wrong, 
and  the  other  of  which  was  wrongly  or  at  least  inade- 
quately stated.  While  between  them,  all  was  left  at  sea. 

Yet  such  was  the  feeling  that  there  ought  to  be  a  polit- 
ical economy,  and  so  agreeable  to  the  ruling  class  was 
what  was  offered  as  such,  that  chairs  for  the  study  of  it 
began  to  multiply.  They  were  of  course  filled  by  men 
who  taught  what  they  had  learned,  with  the  constant  pres- 
sure on  them  of  the  class  dominant  in  all  colleges— a  class 
which,  whatever  be  the  faults  of  a  political  economy,  are 
disposed  to  accept  things  as  they  are  as  the  best  order  of 
things  possible,  and  to  view  with  intense  opposition  any 
radical  change  that  would  provoke  real  discussion.  And 
as  nearly  every  professor  of  political  economy  thought  it 
incumbent  on  him  to  write  a  text-book,  or  at  least  to  do 
something  to  show  a  reason  for  his  existence,  there  was 
much  going  over  old  ground  and  picking  out  of  small 
differences,  but  no  questioning  of  anything  that  could 
arouse  vital  debate.  And  given  a  state  of  society  in  which 
the  many  were  poor  and  the  few  were  rich,  any  attempt  to 


184  THE  NATURE   OF  WEALTH.  Book  II. 

point  out  a  true  political  economy,  if  it  got  attention, 
would  inevitably  arouse  much  debate. 

Thus  in  fact  political  economy,  as  it  found  teachers  and 
professors  and  the  standing  of  a  science,  was  to  the  class 
who  had  appropriated  land  as  belonging  to  them  exclu- 
sively a  very  comfortable  doctrine.  It  applied  the  doctrine 
of  "  letting  things  alone,"  without  any  suggestion  of  the 
question  of  how  things  came  to  be.  It  was,  as  it  was 
styled  by  Clement  C.  Biddle,  the  American  translator  of 
Say,  "the  liberal  doctrine  that  the  most  active,  general 
and  profitable  employments  are  given  to  the  industry  and 
commerce  of  every  people  by  allowing  to  their  direction 
and  application  the  most  perfect  freedom  compatible  ivith 
the  security  of  property."  As  to  what  constitutes  property 
there  was  no  dispute.  And  if  one  did  not  look  too  closely, 
and  beyond  the  usages  of  the  times,  in  the  more  advanced 
European  nations  there  could  be  no  dispute.  Property? 
Why  property  was  of  course  what  was  susceptible  of 
ownership.  Any  fool  would  know  that ! 

Nor  after  the  surrender  of  the  Peel  ministry,  in  time  to 
prevent  it,  was  any  question  of  the  sanction  of  property 
raised.  English  slavery  had  disappeared  in  its  last  forms 
before  the  nineteenth  century  began,  and  though  the 
question  of  the  ownership  of  slaves  in  the  tropical  colonies, 
and  finally  in  the  Southern  United  States,  was  likely  if 
continuously  debated  to  bring  up  the  larger  question,  this 
did  not  appeal  to  the  feelings  of  the  people.  So  it  was 
settled  for  the  time,  as  to  the  colonies  by  the  device  of 
buying  off  the  slave-owners  at  public  expense ;  and  in  the 
United  States  by  the  arbitrament  of  war. 

The  question  of  the  validity  of  property  was  never  really 
raised  in  England  until  after  the  publication  of  "  Progress 
and  Poverty"  began  to  call  it  up.  But  the  attention 
which  that  has  aroused  has  since  brought  to  light  some 
definite  utterances,  which  show,  as  I  take  it,  that  the 


Chap.riL  INEFFECTUAL  GEOPINGS.  185 

doctrines  of  the  French  Physiocrats  would  have  found 
hospitable  reception  in  Great  Britain  had  it  been  possible 
at  the  time  to  have  really  made  them  known. 

Thus  H.  M.  Hyndman  has  dug  up  from  the  British 
Museum  a  lecture  by  Thomas  Spence,  delivered  before 
the  Philosophical  Society  of  Newcastle,  on  November  8, 
1775,  a  year  prior  to  the  publication  of  the  "  Wealth  of 
Nations,"  and  for  which  the  Society,  as  Spence  puts  it,  did 
him  "the  honor77  to  expel  him.  In  this  lecture  Spence 
declares  that  all  men  "have  as  equal  and  just  a  property 
in  land  as  they  have  in  liberty,  air,  or  the  light  and  heat 
of  the  sun,"  and  he  proposes  what  now  would  be  again 
called  "the  single  tax7'— that  the  value  of  land  should  be 
taken  for  all  public  expenses,  and  all  other  taxes  of  what- 
ever kind  and  nature  should  be  abolished.  He  draws  a 
glowing  picture  of  what  humanity  would  be  if  this  simple 
but  most  radical  reform  were  adopted.  But  so  much 
against  the  wishes  of  all  that  had  authority  was  he,  that 
his  proposal  was  utterly  forgotten  until  dug  out  of  its 
burial-place  more  than  a  century  after. 

So,  in  1889,  D.  C.  Macdonald,  a  single-tax  man,  and  a 
solicitor  of  Aberdeen,  dug  out  of  the  Advocates7  Library 
of  Edinburgh,  and  the  British  Museum,  in  London,  copies 
of  a  book  printed  in  1782  by  William  Ogilvie,  Professor 
of  Humanities  in  King's  College,  Aberdeen,  entitled  "  An 
Essay  on  the  Right  of  Property  in  Land,  with  Respect  to 
its  Foundation  in  the  Law  of  Nature,  its  Present  Estab- 
lishment by  the  Municipal  Laws  of  Europe,  and  the  Regu- 
lations by  which  it  might  be  Rendered  More  Beneficial  to 
the  Lower  Ranks  of  Mankind.77  Professor  Ogilvie,  though 
he  makes  no  reference  to  any  other  authority  than  that  of 
Moses,  had  evidently  some  knowledge  of  the  Physiocrats, 
and  most  unquestionably  declares  that  land  is  a  birthright 
which  every  citizen  still  retains.  He  advocates  the  taxation 
of  land,  with  the  entire  abolition  of  all  other  taxes,  though, 


186  THE  NATURE  OF  WEALTH.  Book  II. 

as  if  despairing  of  so  radical  a  reform,  he  proposes  some 
palliatives  such  as  allotments  to  actual  settlers,  leases,  etc. 
He  doubtless  saw  the  utter  hopelessness  of  making  the 
fight  under  existing  conditions,  for  it  seems  probable  that 
his  book  was  never  published,  only  a  few  copies  being 
printed  for  private  circulation  by  the  author. 

Among  the  scholastically  accepted  writers  in  the  first 
thirty  years  of  the  century  are  two  who  seem  to  have  some 
glimmerings  of  the  truth  perceived  by  the  Physiocrats,  of 
the  relations  between  land  and  labor,  though  in  a  curi- 
ously distorted  way.  Dr.  Chalmers,  who  was  a  divinity 
professor  in  the  University  of  Edinburgh,  and  a  strong 
Malthusian,  contended  that  the  owners  of  land  ultimately 
paid  all  taxes  levied  on  labor,  and  contended  that  titles 
(which  he  regarded  as  so  much  retained  by  the  state  for 
beneficial  purposes)  should  be  maintained.  All  others  he 
would  have  ultimately  abolished,  and  the  revenues  of  the 
state  ultimately  raised  from  the  value  of  land.  This,  he 
thought,  would  be  simpler  and  better,  and  avoid  much 
dispute,  "  relieving  government  from  the  odium  of  taxes 
which  so  endanger  the  cause  of  order  and  authority."  He 
was  a  stanch  supporter  of  primogeniture,  opposed  to  any- 
thing which  aimed  at  the  division  of  the  land,  and  would 
have  the  country  enjoy  the  spectacle  of  a  noble  and  splen- 
did aristocracy,  of  which  the  younger  branches  should  be 
supported  by  places  of  at  least  £1000  a  year  in  the  public 
services.  And,  while  he  would  have  the  landlords  pay  all 
taxes,  he  thought  it  "wholesome  and  befitting  that  they 
should  have  the  political  ascendancy  also."  For  "the 
lords  of  the  soil,  we  repeat,  are  naturally  and  properly  the 
lords  of  the  ascendant."  Chalmers  was  a  good  example  of 
the  toadying  spirit  of  so  many  of  the  Scottish  ministers. 
He  afterward  joined  in  the  disruption  of  the  Kirk  by  the 
Free  Kirk  movement.  Yet,  in  spite  of  his  obsequience, 
he  did  not  succeed  in  popularizing  the  single  tax  with  the 


Chap.  VII.  INEFFECTUAL  GROPINGS.  187 

British  aristocracy,  who  fought  the  repeal  of  the  corn-laws 
as  long  as  they  could.  He  passed  as  an  economist  almost 
into  oblivion. 

Another  curious  example  of  the  perversion  of  the  doc- 
trine of  the  relation  between  land  and  labor  was  given  by 
Edward  Gibbon  Wakefield,  who  visited  this  country  in  its 
more  democratic  days  in  the  first  quarter  of  the  century, 
ere  the  natural  result  of  our  thoughtless  acceptance  of 
land  and  true  property  as  alike  wealth,  and  our  desire  to 
get  in  the  first  place  an  owner  for  land  had  begun  to  show 
so  fully  its  effects.  He  was  impressed  with  the  difference 
between  the  society  growing  up  here  and  that  to  which  he 
had  been  used,  and  viewing  everything  from  the  stand- 
point of  those  accustomed  to  look  on  the  rest  of  mankind 
as  created  for  their  benefit,  he  deemed  the  great  social  and 
economic  disadvantage  of  the  United  States  to  be  "the 
scarcity  of  labor."  To  this  he  traces  the  rudeness  of  the 
upper  class— its  want  of  those  refinements,  enjoyments 
and  delicacies  of  life,  common  to  the  aristocracy  of  Eng- 
land. How  could  an  English  gentleman  emigrate  to  a 
country  where  he  might  actually  have  to  black  his  own 
boots,  and  where  no  one  could  count  on  a  constant  supply 
of  labor  ready  to  accept  as  a  boon  any  opportunity  to  per- 
form the  most  menial  and  degrading  service  ?  He  saw,  as 
Adam  Smith  before  him  saw,  that  this  "  scarcity  of  labor" 
came  from  the  cheapness  of  land  where  the  vast  area  of 
the  public  domain  was  open  for  settlement  at  nominal  prices. 
Without  the  slightest  question  that  the  land  was  made  for 
landlords,  and  that  laborers  were  intended  to  furnish  a 
supply  of  labor  for  the  upper  classes,  he  wished  the  new 
countries  which  England  had  yet  to  settle  to  be;  socially, 
politically  and  economically  newer  Englands ;  and,  without 
waiting  for  the  slower  process  of  speculation,  he  wished  to 
bring  about  in  these  new  countries  such  salutary  "  scarcity 
of  employment "  as  would  give  cheap  and  abundant  labor 


188  THE  NATURE  OF  WEALTH.  Book  II. 

from  the  very  start  of  settlement.  He,  therefore,  proposed 
that  land  should  not  be  given,  but  sold  at  the  outset,  at 
what  he  called  a  sufficient  price— a  price  high  enough  to 
make  laborers  work  for  others  until  they  had  acquired  the 
fund  necessary  to  pay  a  price  for  what  nature  offered  with- 
out money  and  without  price.  The  money  received  by  the 
state  in  this  way  he  proposed  to  devote  in  paying  the 
passage  of  suitable  and  selected  immigrants.  This  would 
give  from  the  start  two  classes  of  immigrants  to  settle  the 
great  waste  places  which  England  still  retained,  especially 
in  Australia  and  New  Zealand— the  better  class,  who  would 
pay  their  own  expenses,  and  buy  from  the  government 
their  own  land,  which  would  at  first  have  a  value  j  and  the 
assisted  class,  who,  being  selected  from  the  best  workers 
in  the  old  country,  would  at  once  be  able  to  supply  all  the 
required  labor.  Thus  the  new  country  where  this  plan  was 
adopted  would  from  the  first,  while  wages  were  still  enough 
higher  than  in  England  to  make  working-men,  especially 
if  assisted,  desire  to  go  there,  offer  the  inducement  to  a 
wealthy  and  cultivated  class  of  a  "  reasonable  "  and  ready 
supply  of  labor,  and  save  them  from  such  hardships  from 
the  lack  of  it  as  made  the  United  States  so  unattractive  to 
the  "  better  class  "  of  Englishmen. 

This  plan  was  very  attractive  to  the  more  wealthy  and 
influential  class  of  Englishmen  concerned  in,  or  thinking 
of,  emigrating  to  the  newer  colonies,  and  was  finally  adopted 
by  the  corporation  concerned  in  settling  West  Australia, 
and  afterwards  the  other  Australian  colonies.  But  even 
its  obvious  inferences  never  affected  the  teaching  of 
political  economy. 

In  1850  two  works  appeared  in  England,  which,  though 
neither  of  them  was  from  the  ranks  of  the  scholastic  econ- 
omists, were  both  premonitions  of  a  coming  demand  for  a 
political  economy  which  would  take  some  consideration  of 
the  interest  of  the  masses.  One  of  these  was  by  Herbert 


Chap.  VII.  INEFFECTUAL  GROPINGS.  189 

Spencer,  then  young  and  unknown,  and  was  entitled 
"  Social  Statics,  or  The  Conditions  Essential  to  Human 
Happiness  Specified,  and  the  First  of  Them  Developed." 
Chapter  IX.  of  this  book,  "  The  Right  to  the  Use  of  the 
Earth,"  is  a  telling  denial  of  what  the  economists  of  Smith's 
school  had  quietly  assumed  could  not  be  questioned,  the 
validity  of  property  in  land.  It  got  no  attention  in  Eng- 
land, having  been  noticed  in  the  "  British  Quarterly  Re- 
view "  only  in  1876,  when  his  sociological  works  began  first 
to  be  heard  of.  It  was  however  reprinted  in  the  United 
States  in  1864,  with  a  note  by  the  author,  and  when,  about 
1877,  Appleton  &  Co.,  of  New  York,  became  the  American 
publishers  of  his  philosophical  writings,  they  reprinted 
this  with  his  other  works,  and  on  the  strength  of  them  it 
began  to  get  into  circulation. 

This  was  the  only  work  of  the  kind  I  knew  of  when 
writing  " Progress  and  Poverty  ;"  and  in  "A  Perplexed 
Philosopher"  (1892),  I  have  given  a  full  account  of  it,  and 
of  Mr.  Spencer's  shifting  repudiation  and  final  recantation 
of  what  he  had  said  in  denial  of  property  in  land. " 

In  the  same  year  (1850)  appeared  in  London  "The 
Theory  of  Human  Progression  and  Natural  Probability  of 
a  Reign  of  Justice."  It  was  published  anonymously  and 
dedicated  to  Victor  Cousin  of  France.  The  argument  of 
"  The  Theory  of  Human  Progression  "  is  that  there  is  a 
probability  of  the  reign  of  justice  on  earth,  or  millennium, 
foretold  by  Scriptural  prophecy.  One  of  his  primary 
postulates  is  the  inspiration  of  the  Bible  and  the  divinity 
of  the  founder  of  the  Christian  religion,  which  in  his  view 
is  Scottish  Presbyterianism,  and  which  he  treats  as  the  true 
religion,  all  others  being  false.  But,  though  adhering  to 
the  doctrine  of  the  fall  of  man,  who  is  by  nature  vile  and 
wicked,  he  is  an  evolutionist  in  believing  in  the  natural 
necessary  advance  of  mankind  by  the  progress  of  know- 
ledge, or  to  use  his  phrase,  by  the  progress  of  correct  ere- 


190  THE  NATURE  OF  WEALTH.  Book  II. 

dence  in  the  natural  order  and  necessary  sequence  of  the 
sciences,  to  a  reign  of  justice,  in  which  is  to  grow  a  reign 
of  benevolence. 

The  elements  of  correct  credence  as  he  enunciates  them 
(p.  94)  are : 

1.  The  Bible. 

2.  A  correct  view  of  the  phenomena  of  material  nature. 

3.  A  correct  philosophy  of  the  mental  operations. 

The  three  things  which  he  links  together  as  respectively 
cause  and  effect,  involving  the  conditions  of  society,  are 
(p.  120) : 

Knowledge  and  freedom. 
Superstition  and  despotism. 
Infidelity  and  anarchy. 

And  the  four  propositions  which  best  give  an  idea  of 
the  scope  of  his  work  and  the  course  of  his  thought  are 
(p.  160) : 

1.  On  the  sure  word  of  divine  prophecy  we  anticipate  a  reign  of 
justice  on  the  earth. 

2.  That  a  reign  of  justice  necessarily  implies  that  every  man  in 
the  world  shall  at  some  future  time  be  put  in  possession  of  all  his 
rights. 

3.  That  the  history  of  civilized  communities  shows  us  that  the 
progression  of  mankind  in  a  political  aspect  is  from  a  diversity  of 
privileges  toward  an  equality  of  rights. 

4.  That  one  man  can  have  a  privilege  only  by  depriving  another 
man  or  many  other  men  of  a  portion  of  their  rights.     Consequently 
that  a  reign  of  justice  will  consist  in  the  destruction  of  every  privi- 
lege, and  in  the  restitution  of  every  right. 

These  propositions  are  extended  to  twenty-one  main 
propositions  and  twelve  sub-propositions,  but  they  are  all 
involved  in  the  first  four.  The  tenth  sub-division  of  the 
twentieth  proposition  and  the  twenty-first  proposition  as  a 
whole  are,  however,  well  worth  quoting  as  giving  an  idea 
of  the  character  of  the  man  and  his  thought : 


il.  INEFFECTUAL  GROPINGS.  191 

.  .  .  Knowledge  does  necessarily  produce  change,  as  much  as  heat 
necessarily  produces  change ;  and  where  knowledge  becomes  more 
and  more  accurate,  more  and  more  extensive,  and  more  and  more 
generally  diffused,  change  must  necessarily  take  place  in  the  same 
ratio  and  entail  with  it  a  new  order  of  society,  and  an  amended  con- 
dition of  man  upon  the  globe.  Wherever,  then,  the  unjust  interests 
of  the  ruling  classes  are  required  to  give  way  before  the  progress  of 
knowledge  and  those  ruling  classes  peremptorily  refuse  to  allow  the 
condition  of  society  to  be  amended,  the  sword  is  the  instrument 
which  knowledge  and  reason  may  be  compelled  to  use ;  for  it  is  not 
possible,  it  is  not  within  the  limits  of  man's  choice,  that  the  progress 
of  society  can  be  permanently  arrested  when  the  intellect  of  the 
masses  has  advanced  in  knowledge  beyond  those  propositions,  of 
which  the  present  condition  is  only  the  realization. 

21.  We  posit,  finally,  that  the  acquisition,  scientific  ordination, 
and  general  diffusion  of  knowledge  will  necessarily  obliterate  error 
and  superstition,  and  continually  amend  the  condition  of  man  upon 
the  globe,  until  his  ultimate  condition  shall  be  the  best  the  circum- 
stances of  the  earth  permit  of.  On  this  ground  we  take  up  (what 
might  in  other  and  abler  hands  be  an  argument  of  no  small  interest, 
namely)  the  natural  probability  of  a  millennium,  based  on  the  clas- 
sification of  the  sciences,  on  the  past  progress  of  mankind,  and  on 
the  computed  evolution  of  man's  future  progress.  The  outline  alone 
of  this  argument  we  shall  indicate,  and  we  have  no  hesitation  in 
believing  that  every  one  who  sees  it  in  its  true  light  will  at  once  see 
how  the  combination  of  knowledge  and  reason  must  regenerate  the 
earth  and  evolve  a  period  of  universal  prosperity  which  the  Divine 
Creator  has  graciously  promised,  and  whose  natural  probability  we 
maintain  to  be  within  the  calculation  of  the  human  reason. 

The  book  which,  so  far  as  my  knowledge  goes,  "The 
Theory  of  Human  Progression"  most  nearly  resembles 
in  motive,  scope  and  conclusions  is  Herbert  Spencer's 
"  Social  Statics,"  published  in  the  same  year,  though  evi- 
dently without  knowledge  of  each  other.  Both  seem  to 
have  little  knowledge  of  and  make  slight  reference  to 
writers  on  political  economy— Spencer  referring  in  one 
place  to  Smith,  Mill  and  Chalmers,  while  Dove  quotes  no 
authority  later  than  Moses.  Both  go  largely  over  the  same 
ground,  and  both  reach  substantially  the  same  practical 


192  THE  NATURE  OF  WEALTH.  Book  II. 

conclusion;  both  assert  the  same  grand  doctrine  of  the 
natural  rights  of  men,  which  is  the  essence  of  Jeffersonian 
democracy  and  the  touchstone  of  true  reform  •  both  de- 
clare the  supremacy  of  a  higher  law  than  human  enact- 
ments, and  both  believe  in  an  evolutionary  process  which 
shall  raise  men  to  higher  and  nobler  conditions.  Both 
express  clearly  and  well  the  fundamental  postulates  of  the 
single  tax,  and  both  are  of  course  absolute  free  traders. 
Spencer  devotes  more  space  to  the  land  question,  and  more 
elaborately  proves  the  incompatibility  of  private  ownership 
of  land  with  the  moral  law,  and  declares  the  justice  and 
necessity  of  appropriating  rent  for  public  revenues  with- 
out saying  anything  of  the  mode  j  while  Dove  dwells  at 
more  length  on  the  wickedness  and  stupidity  of  tariffs, 
excises  and  the  other  modes  of  raising  revenues  from  taxes 
on  the  products  of  labor,  and  clearly  indicates  taxation  as 
the  method  of  appropriating  rent  for  public  purposes. 
But  while  the  English  agnostic  might  have  regarded  the 
Scottish  Calvinist  as  yet  in  the  bonds  of  an  utterly  un- 
scientific superstition,  there  is  one  respect  in  which  the 
vigor  and  courage  of  Dove's  thought  shines  superior  to 
Spencer's.  Spencer,  after  demonstrating  the  absolute  in- 
validity of  any  possible  claim  to  the  private  ownership  of 
land,  goes  on  to  say  that  great  difficulties  must  attend  the 
resumption  by  mankind  at  large  of  their  rights  to  the  soil  j 
that  had  we  to  deal  with  the  parties  who  originally  robbed 
the  human  race  of  their  heritage,  we  might  make  short 
work  of  the  matter ;  but  that  unfortunately  most  of  our 
present  landowners  are  men  who  have  either  mediately  or 
immediately  given  for  their  estates  equivalents  of  honestly 
earned  wealth,  and  that  to  "justly  estimate  and  liquidate 
the  claims  of  such  is  one  of  the  most  intricate  problems 
society  will  one  day  have  to  solve." 

But  the  orthodox  Presbyterian  utterly  refuses  thus  to 
bend  the  knee  to  Baal  in  the  slightest  concession.     While 


Cliap.VIL  INEFFECTUAL  GROPINGS.  193 

he  is  not  more  clear  than  Spencer  in  demonstrating  that 
landowners  as  landowners  have  no  rights  whatever,  there 
is  not  one  word  in  his  book  that  recognizes  in  any  way 
their  claims.  On  the  contrary,  he  declares  that  slavery  is 
man-robbery,  and  that  the  £20,000,000  compensation  given 
by  the  British  Parliament  to  the  West  India  planters  on 
the  emancipation  of  their  slaves  was  an  act  of  injustice 
and  oppression  to  the  British  masses,  and  (p.  139)  adds : 

No  man  in  the  world  and  no  association  in  the  world  could  ever 
have  an  equitable  right  to  tax  a  laborer  for  the  purpose  of  remunerat- 
ing a  man-robber ;  and,  although  the  measure  is  now  past  and  done 
with,  we  very  much  question  whether  some  analogous  cases  will 
not  be  cleared  up  by  the  mass  of  the  nation  ere  many  years  pass 
over  the  heads  of  Englishmen.  When  the  question  of  landed 
property  comes  to  a  definite  discussion  there  may  be  little  thought 
of  compensation. 

Yet  neither  in  England  nor  in  the  United  States,  where 
an  edition  seems  to  have  been  published  in  Boston  at  the 
expense  of  Senator  Sumner,  did  Dove  get  any  attention, 
and  I  never  heard  of  it  until  after  the  publication  of 
"  Progress  and  Poverty,"  when,  in  Ireland  in  1882,  I  was 
presented  with  a  copy  by  Charles  Eason,  head  of  the 
Dublin  branch  of  the  great  news-publishing  house  of 
Smith  &  Sons. 

In  1854  appeared  another  book  by  Patrick  Edward 
Dove,  in  which  the  authorship  of  "  The  Theory  of  Human 
Progression  "  was  announced—  "  The  Elements  of  Political 
Science,  in  two  books:  first,  on  Method,  second,  on 
Doctrine."  And  in  1856  appeared  a  third  book,  "The 
Logic  of  the  Christian  Faith,"  being  a  dissertation  on 
skepticism,  pantheism,  the  a  priori  argument,  the  a  pos- 
teriori argument,  the  intuitional  argument  and  revelation, 
also  under  title  of  the  author,  and  with  a  dedication  to 
Charles  Sumner,  Senator  of  the  United  States,  who,  with- 
out his  knowledge,  had  procured  a  republication  of  Dove's 


194  THE  NATURE  OF  WEALTH.  Book  II. 

first  book  in  Boston,  being  moved  thereto  doubtless  by  its 
vigorous  words  on  slavery. 

In  1859  appeared  in  London  "  The  Strength  of  Nations," 
by  Andrew  Bisset,  who  has  since  (1877)  published  "  The 
History  of  the  Struggle  for  Parliamentary  Government 
in  England,"  a  review  of  the  systematic  attempt  of  the 
families  of  Plantagenet,  Tudor  and  Stuart  to  enslave  the 
English  people,  which  is  mainly  occupied  with  the  attempt 
of  Charles  I.,  the  resistance  to  it,  and  his  final  execution. 
"  The  Strength  of  Nations  "  very  suggestively  calls  atten- 
tion to  the  fact  that  feudal  tenures  were  conditioned  on 
the  payment  of  rent  or  special  services  to  the  state,  and 
thus  the  much-lauded  abolition  of  what  was  left  of  the 
feudal  incidents  by  the  Long  Parliament  was  a  relief  of 
the  landholders  of  the  payment  of  what  measured  at 
present  prices  would  suffice  for  the  whole  expenditure  of 
England,  and  the  saddling  of  it  on  general  taxation  j  and 
that  from  this  dates  the  beginning  of  the  English  national 
debt. 

These  books  have  produced  very  little  effect  upon  polit- 
ical economy,  and  some  of  them  have  passed  out  of  print 
without  any  perceptible  effect  at  all.  It  is  likely  that  there 
were  others  in  addition  to  what  I  have  mentioned,  and  it 
is  certain  that  there  were  others  that  occasionally  found 
their  way  into  print  which  irregularly  and  spasmodically 
expressed  some  touch  of  the  idea  formulated  in  lines  of 
the  Wat  Tyler  rising : 

When  Adam  delved  and  Eve  span, 
Who  was  then  a  gentleman? 

Some  notion  of  the  incongruity  of  the  idea  that  a  small 
fraction  of  mankind  were  intended  to  eat,  and  eat  luxuri- 
ously without  working,  and  another  and  far  larger  portion 
to  have  nothing  but  work  to  enable  them  to  eat,  and  be 
compelled  to  beg  as  a  boon  the  opportunity  to  do  that, 


Cliap.VIL  INEFFECTUAL  GROPINGS.  195 

runs  in  broken  flashes  through  much  of  the  reform  litera- 
ture. But  in  political  economy  as  it  up  to  1880  existed 
all  such  questioning  was  tabooed,  and  the  utmost  that 
could  be  found  in  any  of  the  writers  recognized  by  the 
schools  was  a  timid  suggestion  that  the  future  unearned 
increment  of  land  values  might  sometime  be  recognized 
as  belonging  to  the  community,  a  proposition  that,  though 
it  amounted  to  nothing  whatever,  as  landlords  were  ready 
to  sell  land  for  what  would  give  them  any  unearned 
increment  not  yet  in  sight,  caused  John  Stuart  Mill  who 
had  been  giving  some  adhesion  to  it  to  be  looked  on 
askance  by  some,  as  an  awful  radical. 

The  struggle  for  the  repeal  of  the  corn-laws  in  England 
did  not  lead  to  any  development  of  a  protectionist  political 
economy.  Books  and  pamphlets  enough  were  written  in 
favor  of  protection,  but  they  were  merely  appeals  to  old 
habits  of  thought  and  vulgar  prejudices,  and  the  forces  in 
favor  of  repeal  carried  them  down.  Elsewhere,  however, 
it  was  different.  On  the  Continent  the  conditions  under 
which  the  tentative  victory  of  free  trade  was  won  in  Eng- 
land were  lacking.  Cut  up  into  hostile  nations,  burdened 
with  demands  for  revenue,  the  mercantile  system  got  a 
practical  hold  that  could  not  be  broken  by  the  half-hearted 
measures  of  its  English  opponents,  and  the  gleam  of  hope 
which  came  with  the  English-French  treaty  negotiated  be- 
tween Cobden  and  Napoleon  III.  was  destroyed  by  the 
tremendous  struggles  which  followed  the  fall  of  the  latter. 
In  Germany  the  outburst  of  national  feeling  which  fol- 
lowed the  struggles  with  France  and  the  unification  of 
German  states  gave  rise  to  a  school  of  German  economists 
who  taught  a  national  economy,  in  which  under  various 
names,  such  as  romantic,  inductive  and  national,  protec- 
tionism was  advocated. 

When  it  came  to  making  peace  between  England  and 
the  United  States  after  the  War  of  Independence,  the 


196  THE  NATURE  OF  WEALTH.  Book  II. 

American  Commissioners  were  instructed  to  stipulate  for 
a  complete  free  trade  between  the  two  countries.  They 
failed  in  this,  owing  to  the  prevalence  of  the  protective 
sentiment  in  Great  Britain  at  the  time.  When  the  Arti- 
cles of  Confederation  gave  way  to  the  Constitution,  the 
need  for  an  independent  source  of  revenue  took  the  easy 
means  of  laying  a  Federal  tariff  upon  foreign  productions, 
though  free  trade  between  the  States  was  guaranteed ;  and 
the  growth  of  selfish  interests  caused  by  and  promotive  of 
a  constantly  increasing  demand  for  greater  revenue  built 
up  a  strong  party  in  favor  of  protection,  which  had  its 
way  when  the  slavery  question  taking  sectional  shape  put 
the  States  in  which  protectionism  was  dominant  in  control 
of  the  government  with  the  secession  of  the  South.  This 
interest  sought  warrant  in  a  scheme  of  political  economy, 
and  found  it  in  drawing  from  the  German  economists  and 
in  the  writings  of  Henry  C.  Carey  of  Philadelphia,  whose 
theory  in  many  respects  differed  from  the  English  philos- 
ophy, noticeably  in  its  advocacy  of  protection.  In  America 
this  protectionist  semblance  of  a  political  economy  had  its 
chief  seat  in  the  University  of  Pennsylvania,  and  the  sup- 
port of  a  powerful  party  in  which  the  ideas  of  Jefferson 
were  opposed  by  those  of  Hamilton ;  while  in  Great  Britain 
the  works  of  Carlyle  and  the  course  of  modern  study  and 
development  had  in  scholastic  circles  popularized  the 
German. 

Among  the  schools,  moreover,  there  was  a  divergence 
which  began  to  assume  greater  proportions  as  the  success 
of  the  anti-corn-laws  struggle  began  to  be  shown  in  the 
accomplishment  of  all  that  any  of  its  advocates  dared  to 
propose.  This  took  shape  in  a  contention  as  to  value,  which 
inclined  to  emphasize  the  fact  that  the  admission  that  some 
immaterial  things  were  conceded  to  be  wealth  destroyed 
the  ability  to  keep  any  immaterial  things  having  value  out 
of  that  category,  and  consequently  that  wealth  in  the 


Cliap.VIL  INEFFECTUAL  GROPINGS.  197 

common  sense  was  the  only  thing  to  be  considered  in 
political  economy,  which  was  really  a  science  of  exchanges. 
With  the  efforts  of  Jevons,  Macleod  and  others  this  began 
to  make  way,  and  naturally  affiliated  with  the  historical, 
the  inductive,  the  socialistic  and  other  protectionist  schools 
which  grew  from  the  Continental  teachings.  Instead  of 
working  for  greater  directness  and  simplicity,  it  really 
made  of  political  economy  an  occult  science,  in  which 
nothing  was  fixed,  and  the  professors  of  which,  claiming 
superior  knowledge,  could  support  whatever  they  chose  to. 
During  the  century  another  form  of  protectionism  had 
been  growing  up,  originating  in  England,  but  gaining 
adherents  everywhere.  Like  the  others,  it  recognized  no 
difference  between  land  and  products  of  labor,  counting 
them  all  as  wealth,  and  aimed  by  main  strength  at  im- 
provement in  the  conditions  of  labor.  Recognizing  the 
workers  as  a  class  naturally  separate  from  employers,  it 
aimed  to  unite  the  laborers  in  combinations,  and  to  invoke 
in  their  behalf  the  power  of  the  state  to  impose  restrictions, 
shorten  hours,  and  in  various  ways  to  serve  their  interests 
at  the  expense  of  the  primarily  employing  class.  The 
German  mind,  learned,  bureaucratic  and  incomprehensible, 
put  this  in  the  form  of  what  passed  for  a  system  in  Karl 
Marx's  ponderous  two  volumes  entitled  "  Capital,"  written 
in  England  in  1867,  but  published  in  German  and  not 
translated  into  English  until  after  his  death  in  1887. 
Without  distinguishing  between  products  of  nature  and 
the  products  of  man,  Marx  holds  that  there  are  two  kinds  of 
value— use  value  and  exchange  value— and  that  through 
some  alchemy  of  buying  and  selling  the  capitalist  who 
hires  men  to  turn  material  into  products  gets  a  larger 
value  than  he  gives.  Upon  this  economic  proposition  of 
Marx  (it  can  hardly  be  called  a  theory),  or  others  similar 
to  it,  political  schemes  with  slight  variations  have  been 
promulgated  after  the  manner  of  political  platforms. 


198  THE  NATUEE  OF  WEALTH.  Book  II. 

Under  the  name  of  socialism,  a  name  which  all  such 
movements  have  now  succeeded  in  appropriating,  all  such 
plans  are  embraced.  We  sometimes  hear  of  "  scientific 
socialism,"  as  something  to  be  established,  as  it  were,  by 
proclamation,  or  by  act  of  government.  In  this  there  is  a 
tendency  to  confuse  the  idea  of  science  with  that  of  some- 
thing purely  conventional  or  political,  a  scheme  or  pro- 
posal, not  a  science.  For  science,  as  previously  explained, 
is  concerned  with  natural  laws,  not  with  the  proposal  of 
man— with  relations  which  always  have  existed  and  always 
must  exist.  Socialism  takes  no  account  of  natural  laws, 
neither  seeking  them  nor  striving  to  be  governed  by  them. 
It  is  an  art  or  conventional  scheme  like  any  other  scheme 
in  politics  or  government,  while  political  economy  is  an 
exposition  of  certain  invariable  laws  of  human  nature. 
The  proposal  which  socialism  makes  is  that  the  collectivity 
or  state  shall  assume  the  management  of  all  means  of 
production,  including  land,  capital  and  man  himself;  do 
away  with  all  competition,  and  convert  mankind  into  two 
classes,  the  directors,  taking  their  orders  from  government 
and  acting  by  governmental  authority,  and  the  workers, 
for  whom  everything  shall  be  provided,  including  the  di- 
rectors themselves.  It  is  a  proposal  to  bring  back  man- 
kind to  the  socialism  of  Peru,  but  without  reliance  on 
divine  will  or  power.  Modern  socialism  is  in  fact  without 
religion,  and  its  tendency  is  atheistic.  It  is  more  destitute 
of  any  central  and  guiding  principle  than  any  philosophy 
I  know  of.  Mankind  is  here  j  how,  it  does  not  state ;  and 
must  proceed  to  make  a  world  for  itself,  as  disorderly  as 
that  which  Alice  in  Wonderland  confronted.  It  has  no 
system  of  individual  rights  whereby  it  can  define  the  ex- 
tent to  which  the  individual  is  entitled  to  liberty  or  to 
which  the  state  may  go  in  restraining  it.  And  so  long  as 
no  individual  has  any  principle  of  guidance  it  is  impossible 
that  society  itself  should  have  any.  How  such  a  combina- 


Chap.  VII.  INEFFECTUAL  GROPINGS.  199 

tion  could  be  called  a  science,  and  how  it  should  get  a  fol- 
lowing, can  be  accounted  for  only  by  the  "  fatal  facility  of 
writing  without  thinking/'  which  the  learned  German 
ability  of  studying  details  without  any  leading  principle 
permits  to  pass,  and  by  the  number  of  places  which  such 
a  bureaucratic  organization  would  provide.  However, 
through  government  repression  and  its  falling  in  with 
trade-union  notions  it  has  made  great  headway  in  Ger- 
many, and  has  taken  considerable  hold  in  England. 

This  was  the  condition  of  things  at  the  beginning  of  the 
eighth  decade  of  the  century,  when  the  English  political 
economy,  the  only  economy  making  any  pretensions  to  a 
science,  received  from  a  newer  and  freer  England  what  has 
proved  a  fatal  blow. 


CHAPTER  VIII. 

BREAKDOWN   OF  SCHOLASTIC  POLITICAL 
ECONOMY. 

SHOWING  THE  REASON,  THE  RECEPTION,  AND  EFFECT  ON  PO- 
LITICAL ECONOMY  OF  "PROGRESS  AND  POVERTY." 

"Progress  and  Poverty"— Preference  of  professors  to  abandon  the 
"  science  n  rather  than  radically  change  it,  brings  the  breakdown 
of  scholastic  economy — The  "  Encyclopaedia  Britannica  " — The 
"Austrian  school"  that  has  succeeded  the  "classical." 

E  January,  1880,  preceded  in  1879  by  an  author's 
edition  in  San  Francisco,  appeared  my  "  Progress  and 
Poverty,"  and  it  was  followed  later  in  the  same  year  by  an 
English  edition  and  a  German  edition,  and  in  1882  by 
cheap  paper  editions  both  in  England  and  the  United 
States.  The  history  of  the  book  is  briefly  this :  I  reached 
California  by  sea  in  the  early  part  of  1858,  and  finally 
became  an  editorial  writer.  In  1869  I  went  East  on 
newspaper  business,  returning  to  California  in  the  early 
summer  of  1870.  John  Russell  Young  was  at  that  time 
managing  editor  of  the  New  York  Tribune,  and  I  wrote 
for  him  an  article  on  "  The  Chinese  on  the  Pacific  Coast," 
a  question  that  had  begun  to  arouse  attention  there,  taking 
the  side  popular  among  the  working-classes  of  the  Coast, 
in  opposition  to  the  unrestricted  immigration  of  that 
people.  Wishing  to  know  what  political  economy  had  to 
say  about  the  causes  of  wages,  I  went  to  the  Philadelphia 

200 


Cha$ 


Chap.  VIII.        THE   SCHOLASTIC   BEEAKDOWN.  201 

Library,  looked  over  John  Stuart  Mill's  "  Political  Econ- 
omy/' and  accepting  his  view  without  question,  based  my 
article  upon  it.  This  article  attracted  attention,  especially 
in  California,  and  a  copy  I  sent  from  there  to  John  Stuart 
Mill  brought  a  letter  of  commendation. 

While  in  the  East,  the  contrast  of  luxury  and  want  that 
I  saw  in  New  York  appalled  me,  and  I  left  for  the  West 
feeling  that  there  must  be  a  cause  for  this,  and  that  if 
possible  I  would  find  out  what  it  was.  Turning  over  the 
matter  in  my  mind  amid  pretty  constant  occupation,  I  at 
length  found  the  cause  in  the  treatment  of  land  as  prop- 
erty, and  in  a  pamphlet  which  I  took  an  interval  of  leisure 
to  write,  "Our  Land  and  Land  Policy"  (San  Francisco, 
1871),  I  stated  it.  Something  like  a  thousand  copies  of 
this  were  sold ;  but  I  saw  that  to  command  attention  the 
work  must  be  done  more  thoroughly,  and  refraining  from 
any  effort  to  press  it  at  the  East  until  I  knew  more,  I 
engaged  with  others  in  starting  (December,  1871)  a  small 
San  Francisco  daily  paper,  which  occupied  my  attention, 
though  I  never  forgot  my  main  purpose,  until  December, 
1875,  when,  becoming  entangled  with  an  obligation  to  a 
rich  man  (U.  S.  Senator  John  P.  Jones),  whose  note  we 
had  at  his  own  request  taken,  I  went  out  penniless.  I 
then  asked  the  Governor  (Irwin),  whom  I  had  supported, 
for  a  place  that  would  give  me  leisure  to  devote  myself  to 
thoughtful  work.  He  gave  me  what  was  much  of  a  sine- 
cure, and  which  has  now  been  abolished— the  position  of 
State  Inspector  of  Gas-meters.  This,  while  giving,  though 
irregularly,  enough  to  live  on,  afforded  ample  leisure.  I  had 
intended  to  devote  this  to  my  long-cherished  plan;  and 
after  some  time  spent  in  waiting  and  speaking,  with  inter- 
vals of  reading  and  study,  I  brought  out  "  Progress  and 
Poverty  "  in  an  author's  edition,  in  August,  1879. 

In  this  book  I  took  the  same  question  that  had  perplexed 
me.  Stating  the  world- wide  problem  in  an  introductory 


202  THE  NATURE  OF  WEALTH.  Book  II. 

chapter,  I  found  that  the  explanation  of  it  given  by  the 
accepted  political  economy  was  that  wages  are  drawn  from 
capital,  and  constantly  tend  to  the  lowest  amount  on  which 
labor  will  consent  to  live  and  reproduce,  because  the 
increase  in  the  number  of  laborers  tends  naturally  to  fol- 
low and  overtake  any  increase  in  capital.  Examining  this 
doctrine  in  Book  I.,  consisting  of  five  chapters,  entitled 
"Wages  and  Capital,"  I  showed  that  it  was  based  upon 
misconceptions,  and  that  wages  were  not  drawn  from 
existing  capital,  but  produced  by  labor.  In  Book  II., 
"  Population  and  Subsistence,"  I  devoted  four  chapters  to 
examining  and  disproving  the  Malthusian  theory.  Then 
in  Book  III.,  "The  Laws  of  Distribution,"  I  showed 
(in  eight  chapters)  that  what  were  given  as  laws  did  not 
correlate,  and  proceeded  to  show  what  the  laws  of  rent, 
interest  and  wages  really  were.  In  Book  IV.  (four  chapters), 
I  proved  that  the  effect  of  material  progress  was  to  increase 
the  proportion  of  the  product  that  would  go  to  rent.  In 
Book  V.  (two  chapters),  I  showed  this  to  be  the  primary 
cause  of  paroxysms  of  industrial  depression,  and  of  the 
persistence  of  poverty  amid  advancing  wealth.  In  Book 
VI.,  "The  Remedy"  (two  chapters),  I  showed  the  inade- 
quacy of  all  remedies  for  industrial  distress  short  of  a 
measure  for  giving  the  community  the  benefit  of  the  increase 
of  rent.  In  Book  VII.  (five  chapters),  I  examined  the  jus- 
tice ;  in  Book  VIII.  (four  chapters),  the  exact  relation  and 
practical  application  of  this  remedy  j  and  in  Book  IX.  (four 
chapters),  I  discussed  its  effect  on  production,  on  distribu- 
tion, on  individuals  and  classes,  and  social  organization 
and  life ;  while  in  Book  X.  (five  chapters),  I  worked  out 
briefly  the  great  law  of  human  progress,  and  showed  the 
relation  to  this  law  of  what  I  proposed.  The  conclu- 
sion (one  chapter),  "  The  Problem  of  Individual  Life,"  is 
devoted  to  the  problem  that  arises  in  the  heart  of  the 
individual. 


Chap.VIIL        THE  SCHOLASTIC  BREAKDOWN.  203 

This  work  was  the  most  thorough  and  exhaustive  ex- 
amination of  political  economy  that  had  yet  been  made, 
going  over  in  the  space  of  less  than  six  hundred  pages  the 
whole  subject  that  I  deemed  it  necessary  to  explain,  and 
completely  recasting  political  economy.  I  could  get  no 
one  to  print  the  work  except  my  old  partner  in  San 
Francisco,  William  M.  Hinton,  who  had  gone  into  the 
printing  business,  and  who  had  sufficient  faith  in  me  to 
make  the  plates.  I  sold  this  author's  edition  in  San  Fran- 
cisco at  a  good  price,  which  almost  paid  for  the  plates,  and 
sent  copies  to  publishers  in  New  York  and  London,  offer- 
ing to  furnish  them  with  plates.  With  the  heavy  expense 
met,  Appleton  &  Co.,  of  New  York,  undertook  its  printing, 
and  though  I  could  get  no  English  publisher  at  the  time, 
before  the  year  of  first  publication  was  out  they  got  Kegan 
Paul,  Trench  &  Co.  to  undertake  its  printing  in  London.  In 
the  meantime,  before  publishing  this  book,  I  had  delivered 
a  lecture  in  San  Francisco  which  led  to  the  formation 
of  the  Land  Reform  Union  of  San  Francisco,  the  first  of 
many  similar  movements  since. 

"Progress  and  Poverty"  has  been,  in  short,  the  most 
successful  economic  work  ever  published.  Its  reasoning 
has  never  been  successfully  assailed,  and  on  three  con- 
tinents it  has  given  birth  to  movements  whose  practical 
success  is  only  a  question  of  time.  Yet  though  the  scho- 
lastic political  economy  has  been  broken,  it  has  not  been, 
as  I  at  the  time  anticipated,  by  some  one  of  its  professors 
taking  up  what  I  had  pointed  out ;  but  a  new  and  utterly 
incoherent  political  economy  has  taken  its  place  in  the 
schools. 

Among  the  adherents  of  the  scholastic  economy,  who 
had  been  claiming  it  as  a  science,  there  had  been  from  the 
time  of  Smith  no  attempt  to  determine  what  wealth  was ; 
no  attempt  to  say  what  constituted  property,  and  no  at- 
tempt to  make  the  laws  of  production  or  distribution  cor- 


204  THE  NATURE  OF  WEALTH.  Book  II. 

relate  and  agree,  until  there  thus  burst  on  them  from  a 
fresh  man,  without  either  the  education  or  the  sanction  of 
the  schools,  on  the  remotest  verge  of  civilization,  a  recon- 
struction of  the  science,  that  began  to  make  its  way  and 
command  attention.  What  were  their  training  and  labo- 
rious study  worth  if  it  could  be  thus  ignored,  and  if  one 
who  had  never  seen  the  inside  of  a  college,  except  when 
he  had  attempted  to  teach  professors  the  fundamentals  of 
their  science,  whose  education  was  of  the  mere  common - 
school  branches,  whose  alma  mater  had  been  the  forecastle 
and  the  printing-office,  should  be  admitted  to  prove  the 
inconsistency  of  what  they  had  been  teaching  as  a  science  ? 
It  was  not  to  be  thought  of.  And  so  while  a  few  of  these 
professional  economists,  driven  to  say  something  about 
"  Progress  and  Poverty,"  resorted  to  misrepresentation, 
the  majority  preferred  to  rely  upon  their  official  positions 
in  which  they  were  secure  by  the  interests  of  the  dominant 
class,  and  to  treat  as  beneath  contempt  a  book  circulating 
by  thousands  in  the  three  great  English-speaking  countries 
and  translated  into  all  the  important  modern  languages. 
Thus  the  professors  of  political  economy  seemingly  re- 
jected the  simple  teachings  of  "  Progress  and  Poverty," 
refrained  from  meeting  with  disproof  or  argument  what  it 
had  laid  down,  and  treated  it  with  contemptuous  silence. 
Had  these  teachers  of  the  schools  frankly  admitted  the 
changes  called  for  by  "  Progress  and  Poverty,"  something 
of  the  structure  on  which  they  built  might  have  been  re- 
tained. But  that  was  not  in  human  nature.  It  would 
not  have  been  merely  to  accept  a  new  man  without  the 
training  of  the  schools,  but  to  admit  that  the  true  science 
was  open  to  any  one  to  pursue,  and  could  be  successfully 
continued  only  on  the  basis  of  equal  rights  and  privileges. 
It  would  not  merely  have  made  useless  so  much  of  the 
knowledge  that  they  had  laboriously  attained,  and  was 
their  title  to  distinction  and  honor,  but  would  have  con- 


Chap.VIII.        THE  SCHOLASTIC  BREAKDOWN.  205 

verted  them  and  their  science  into  opponents  of  the  tre- 
mendous pecuniary  interests  that  were  vitally  concerned 
in  supporting  the  justification  of  the  unjust  arrangements 
which  gave  them  power.  The  change  in  credence  that  this 
would  have  involved  would  have  been  the  most  revolu- 
tionary that  had  ever  been  made,  involving  a  far-reaching 
change  in  all  the  adjustments  of  society  such  as  had  hardly 
before  been  thought  of,  and  never  before  been  accom- 
plished at  one  stroke  j  for  the  abolition  of  chattel  slavery 
was  as  nothing  in  its  effects  as  compared  with  the  far- 
reaching  character  of  the  abolition  of  private  ownership 
of  land.  Thus  the  professors  of  political  economy,  having 
the  sanction  and  support  of  the  schools,  preferred,  and 
naturally  preferred,  to  unite  their  differences,  by  giving 
up  what  had  before  been  insisted  on  as  essential,  and  to 
teach  what  was  an  incomprehensible  jargon  to  the  ordinary 
man,  under  the  assumption  of  teaching  an  occult  science, 
which  required  a  great  study  of  what  had  been  written  by 
numerous  learned  professors  all  over  the  world,  and  a 
knowledge  of  foreign  languages.  So  the  scholastic  polit- 
ical economy,  as  it  had  been  taught,  utterly  broke  down, 
and,  as  taught  in  the  schools,  tended  to  protectionism 
and  the  German,  and  to  the  assumption  that  it  was  a 
recondite  science  on  which  no  one  not  having  the  indorse- 
ment of  the  colleges  was  competent  to  speak,  and  on  which 
only  a  man  of  great  reading  and  learning  could  express  an 
opinion. 

The  first  evidence  of  the  change  was  given  in  the  "  En- 
cyclopaedia Britannica,"  which  in  Vol.  XIX.  of  the  ninth 
edition,  printed  in  1886,  discarded  the  dogmatic  article  on 
the  science  of  political  economy,  which  had  been  printed 
in  previous  editions,  and  on  the  plea  that  political  economy 
was  really  in  a  transition  state,  and  a  dogmatic  treatise 
would  not  be  opportune,  gave  the  space  instead  to  an 
article  on  the  science  of  political  economy  by  Professor 


206  THE  NATURE  OF  WEALTH.  Boole  II. 

J.  K.  Ingram,  which  undertook  to  review  all  that  had  been 
written  about  it,  and  was  almost  immediately  reprinted  in 
an  8vo  volume  with  an  introduction  by  Professor  E.  J. 
James,  of  the  University  of  Pennsylvania,  the  leading 
American  protectionist  institution  of  learning. 

This  confession  that  the  old  political  economy  was  dead 
was  written  in  the  "  good  God,  good  devil,"  or  historical 
style,  and  consisted  in  a  notice  of  the  writers  on  political 
economy,  from  the  most  ancient  times,  through  a  first,  a 
second  and  a  third  modern  phase,  to  the  coming  or  histor- 
ical phase. 

Adam  Smith  is  put  down  as  leading  in  the  third  modern 
school— the  system  of  natural  liberty.  Among  the  prede- 
cessors of  Smith  are  reckoned  the  French  Physiocrats, 
whose  proposition  for  a  single  tax  on  the  value  of  land  is 
related  to  their  doctrine  of  the  productiveness  of  agricul- 
ture and  the  sterility  of  manufactures  and  commerce, 
"which  has  been  disposed  of  by  Smith  and  others,  and 
falls  to  the  ground  with  the  doctrine  on  which  it  was 
based ;"  and  Smith  himself  is  treated  as  a  respectable  "  has- 
been,"  whose  teachings  must  now  give  way  to  the  wider 
criticism  and  larger  knowledge  of  the  historical  school. 
Writers  of  France,  Spain,  Germany,  Italy  and  northern 
nations  are  referred  to  in  the  utmost  profusion,  but  there 
is  no  reference  whatever  to  the  man  or  the  book  that  was 
then  exerting  more  influence  upon  thought  and  finding 
more  purchasers  than  all  the  rest  of  them  combined,  an 
example  which  has  been  followed  to  this  day  in  the  elabo- 
rate four- volume"  Dictionary  of  Political  Economy,"  edited 
by  B,.  H.  Inglis  Palgrave. 

This  action  was  enough.  The  encyclopaedias  and  dic- 
tionaries printed  since  have  followed  this  example  of  the 
Britannica.  Chambers,  which  was  the  first  to  print  a  new 
and  revised  edition,  and  Johnson's,  which  soon  followed, 
concluded  in  1896,  discarded  what  they  had  previously 


Cliap.VIIL        THE   SCHOLASTIC  BREAKDOWN.  207 

printed  as  the  teaching  of  political  economy  for  articles 
in  the  style  of  the  Britannica's  j  while  the  new  dictionaries 
are  repeatedly  giving  place  to  the  jargon  which  has  been 
introduced  as  economic  terms. 

As  for  the  University  of  Pennsylvania,  the  great  au- 
thority of  American  scholastic  protectionism,  it  may  be 
said  that  it  soon  after  relegated  to  a  back  seat  its  Professor 
of  Political  Economy,  Professor  Robert  Ellis  Thompson, 
a  Scotsman,  who  had  been  up  to  that  time  teaching  the 
best  scientific  justification  of  protectionism  that  could  be 
had,  and  has  put  in  his  place  the  Professor  E.  J.  James 
already  spoken  of,  and  thrown  its  whole  influence  and  re- 
sources into  the  teaching  of  protection  by  the  Anglicized 
historical  and  inductive  method,  under  a  new  though 
rarely  mentioned  name.  The  new  science  speaks  of  the 
"science  of  economics"  and  not  of  "political  economy;" 
teaches  that  there  are  no  eternally  valid  natural  laws  j  and, 
asked  if  free  trade  or  protection  be  beneficial  or  if  the  trusts 
be  good  or  bad,  declines  to  give  a  categorical  answer,  but 
replies  that  this  can  be  decided  only  as  to  the  particular 
time  and  place,  and  by  a  historical  investigation  of  all 
that  has  been  written  about  it.  As  such  inquiry  must,  of 
course,  be  left  to  professors  and  learned  men,  it  leaves  the 
professors  of  "economics,"  who  have  almost  universally 
taken  the  places  founded  for  professors  of  "political  econ- 
omy," to  dictate  as  they  please,  without  any  semblance  of 
embarrassing  axioms  or  rules.  How  this  lends  itself  to 
an  acquiescence  in  the  views  or  whims  of  the  wealthy  class, 
dominant  in  all  colleges,  the  University  of  Pennsylvania, 
controlled  in  the  interests  of  protectionists  for  revenue 
only,  was  the  first  to  find  out,  but  it  has  been  rapidly  and 
generally  followed. 

Such  inquiry  as  I  have  been  able  to  make  of  the  recently 
published  works  and  writings  of  the  authoritative  pro- 
fessors of  the  science  has  convinced  me  that  this  change 


208  THE  NATUBE  OF  WEALTH.  Book  II. 

has  been  general  among  all  the  colleges,  both  of  England 
and  the  United  States.  So  general  is  this  scholastic  utter- 
ance that  it  may  now  be  said  that  the  science  of  political 
economy,  as  founded  by  Adam  Smith  and  taught  authori- 
tatively in  1880,  has  now  been  utterly  abandoned,  its  teach- 
ings being  referred  to  as  teachings  of  "  the  classical  school " 
of  political  economy,  now  obsolete. 

What  has  succeeded  is  usually  denominated  the  Austrian 
school,  for  no  other  reason  that  I  can  discover  than  that 
"  far  kine  have  long  horns."  If  it  has  any  principles,  I  have 
been  utterly  unable  to  find  them.  The  inquirer  is  usually 
referred  to  the  incomprehensible  works  of  Professor  Alfred 
Marshall  of  Cambridge,  England,  whose  first  764-page 
volume  of  his  "Principles  of  Economics,"  out  in  1891,  has 
not  yet  given  place  to  a  second ;  to  the  ponderous  works  of 
Eu gen  V.  Bohm-Bawerk,  Professor  of  Political  Economy, 
first  in  Innsbruck  and  then  at  Vienna,  "  Capital  and  In- 
terest" and  "The  Positive  Theory  of  Capital,"  translated 
by  Professor  William  Smart  of  Glasgow ;  or  to  Professor 
Smart's  "  Introduction  to  the  Theory  of  Value  on  the  Lines 
of  Menger,  Wieser  and  Bohm-Bawerk,"  or  to  a  lot  of  Ger- 
man works  written  by  men  he  never  heard  of  and  whose 
names  he  cannot  even  pronounce. 

This  pseudo-science  gets  its  name  from  a  foreign  lan- 
guage, and  uses  for  its  terms  words  adapted  from  the 
German— words  that  have  no  place  and  no  meaning  in  an 
English  work.  It  is,  indeed,  admirably  calculated  to  serve 
the  purpose  of  those  powerful  interests  dominant  in  the 
colleges  under  our  organization,  that  must  fear  a  simple 
and  understandable  political  economy,  and  who  vaguely 
wish  to  have  the  poor  boys  who  are  subjected  to  it  by 
their  professors  rendered  incapable  of  thought  on  economic 
subjects.  There  is  nothing  that  suggests  so  much  what 
Schopenhauer  ("Parerga  and  Paralipomejia ")  said  of  the 
works  of  the  German  philosopher  Hegel  than  what  the 


Chap.rill.        THE  SCHOLASTIC  BREAKDOWN. 

professors  have  written,  and  the  volumes  for  mutual  ad- 
miration which  they  publish  as  serials : 

If  one  should  wish  to  make  a  bright  young  man  so  stupid  as  to 
become  incapable  of  all  real  thinking,  the  best  way  would  be  to 
commend  to  him  a  diligent  study  of  these  works.  For  these  monstrous 
piecings  together  of  words  which  really  destroy  and  contradict  one 
another  so  causes  the  mind  to  vainly  torment  itself  in  the  effort  to 
discover  their  meaning  that  at  last  it  collapses  exhausted,  with  its 
capacity  for  thinking  so  completely  destroyed  that  from  that  time  on 
meaningless  phrases  count  with  it  for  thoughts. 

It  is  to  this  state  that  political  economy  in  the  teachings 
of  the  schools,  which  profess  to  know  all  about  it,  has  now 
come. 


CHAPTER  IX. 
WEALTH  AND  VALUE. 

SHOWING  THE  REASON  FOB  CONSIDERING  THE  NATURE  OF 
VALUE  BEFORE  THAT  OF  WEALTH. 

The  point  of  agreement  as  to  wealth— Advantages  of  proceeding 
from  this  point. 

WE  have  seen  the  utter  confusion  that  exists  among 
economists  as  to  the  nature  of  wealth,  and  have 
sufficiently  shown  its  causes  and  results.  Let  us  return 
now  to  the  question  we  have  in  hand,  and  that  must  first 
be  settled  before  we  can  advance  on  solid  ground :  What 
is  the  meaning  of  wealth  as  an  economic  term  ? 

The  lack  of  definiteness  and  want  of  consistency  as  to 
the  nature  of  the  wealth  of  nations,  with  which  Adam 
Smith  began,  have  in  the  hands  of  his  accredited  succes- 
sors resulted  in  confusion  so  much  worse  confounded  that 
the  only  proposition  as  to  wealth  on  which  we  may  say 
that  all  economists  are  agreed  is  that  all  wealth  has  value. 
But  as  to  whether  all  that  has  value  is  wealth,  or  as  to 
what  forms  of  value  are  wealth  and  what  not,  there  is  wide 
divergence.  And  if  we  consider  the  definitions  that  are 
given  in  accepted  works  either  of  the  term  wealth  or  of 
the  sub-term  of  wealth,  capital,  it  will  be  seen  that  the 
confusions  as  to  the  nature  of  wealth  which  they  show 
seem  to  proceed  from  confusions  as  to  the  nature  of  value. 

210 


Chap.  IX.  WEALTH  AND  VALUE.  211 

It  is  quite  possible,  I  think,  to  fix  the  meaning  of  the 
term  wealth  without  first  fixing  the  meaning  of  the  term 
value.  This  I  did  in  "Progress  and  Poverty,"  where 
my  purpose  in  defining  the  meaning  of  wealth  was  to 
fix  the  meaning  of  its  sub-term,  capital,  in  order  to  see 
whether  or  not  it  is  true  that  wages  are  drawn  from 
capital.  But  as  in  the  present  work,  being  a  treatise  on 
the  whole  subject  of  political  economy,  it  will  be  necessary 
to  treat  independently  of  the  nature  of  value,  it  will,  I 
think,  be  more  conducive  to  orderly  and  concise  arrange- 
ment to  consider  the  nature  of  value  before  proceeding 
definitely  to  the  consideration  of  the  nature  of  wealth. 

And  since  minds  that  have  been  befogged  by  accepted 
confusions  may  be  more  easily  opened  to  the  truth  by 
pointing  out  in  what  these  confusions  consist,  and  how 
they  originate,  this  mode  of  proceeding  to  a  determination 
of  the  nature  of  wealth  through  an  examination  of  the 
nature  of  value  will  have  the  advantage  of  meeting  on  the 
way  the  confusions  as  to  value  which  in  the  minds  of  the 
students  of  the  scholastic  economy  have  perplexed  the  idea 
of  wealth. 


CHAPTER  X. 
VALUE  IN  USE  AND  VALUE  IN  EXCHANGE. 

SHOWING  THE  TWO  SENSES  OF  VALUE  5  HOW  THE  DISTINC- 
TION HAS  BEEN  IGNORED,  AND  ITS  REAL  VALIDITY;  AND 
THE  REASON  FOR  CONFINING  THE  ECONOMIC  TERM  TO  ONE 

SENSE. 

Importance  of  the  term  value— Original  meaning  of  the  word- 
Its  two  senses — Names  for  them  adopted  by  Smith— Utility  and 
desirability— Mill's  criticism  of  Smith— Complete  ignoring  of  the 
distinction  by  the  Austrian  school— Cause  of  this  confusion- 
Capability  of  use  not  usefulness — Smith's  distinction  a  real  one 
— The  dual  use  of  one  word  in  common  speech  must  be  avoided  in 
political  economy— Intrinsic  value. 

rilHE  term  value  is  of  most  fundamental  importance 
JL  in  political  economy  j  so  much  so  that  by  some  writers 
political  economy  has  been  styled  the  science  of  values. 
Yet  in  the  consideration  of  the  meaning  and  nature  of 
value  we  come  at  once  into  the  very  quicksand  and  f  ogland 
of  economic  discussion— a  point  which  from  the  time  of 
Adam  Smith  to  the  present  has  been  wrapped  in  increasing 
confusions  and  beset  with  endless  controversy.  Let  us 
move  carefully,  even  at  the  cost  of  what  may  seem  at  the 
moment  needless  pains,  for  here  is  a  point  from  which 
apparently  slight  divergences  may  ultimately  distort  con- 
clusions as  to  matters  of  the  utmost  practical  moment. 

212 


Chap.  X.  THE  TWO  SENSES  OF  VALUE.  213 

The  original  and  widest  meaning  of  the  word  "  value  "  is 
that  of  worth  or  worthiness,  which  involves  and  expresses 
the  idea  of  esteem  or  regard. 

But  we  esteem  some  things  for  their  own  qualities  or 
for  uses  to  which  they  may  be  directly  put,  while  we  esteem 
other  things  for  what  they  will  bring  in  exchange.  We 
do  not  distinguish  the  kind  or  reason  of  regard  in  our  use 
of  the  word  esteem,  nor  yet  is  there  any  need  of  doing 
so  in  our  common  use  of  the  word  value.  The  sense  in 
which  the  word  value  is  used,  when  not  expressed  in 
the  associated  words  or  context,  is  for  common  purposes 
sufficiently  indicated  by  the  conditions  or  nature  of  the 
thing  to  which  value  is  attributed.  Thus,  the  one  word 
value  has  in  common  English  speech  two  distinct  senses. 
One  is  that  of  usefulness  or  utility— as  when  we  speak  of 
the  value  of  the  ocean  to  man,  the  value  of  the  compass  in 
navigation,  the  value  of  the  stethoscope  in  the  diagnosis 
of  disease,  the  value  of  the  antiseptic  treatment  in  surgery ; 
or  when,  having  in  mind  the  merits  of  the  mental  produc- 
tion, its  quality  of  usefulness  to  the  reader  or  to  the  public, 
we  speak  of  the  value  of  a  book. 

The  other  and,  though  derived,  utterly  distinct  sense  of 
the  word  value,  is  that  of  what  is  usually,  and  for  most 
purposes  even  of  political  economy,  sufficiently  described 
as  exchangeability  or  purchasing  power— as  when  we  speak 
of  the  value  of  gold  as  greater  than  that  of  iron ;  of  a  book 
in  rich  binding  as  being  more  valuable  than  the  same  book 
in  plain  binding ;  of  the  value  of  a  copyright  or  a  patent ; 
or  of  the  lessening  in  the  value  of  steel  by  the  Bessemer 
process,  or  in  that  of  aluminium  by  the  improvements  in 
extraction  now  going  on. 

The  first  sense  of  the  word  value,  which  is  that  of  use- 
fulness, the  quality  that  a  thing  may  have  of  ministering 
directly  to  human  needs,  was  distinguished  by  Adam  Smith 
as  "  value  in  use." 


214  THE  NATURE  OF  WEALTH.  Kookll. 

The  second  sense  of  the  word  value,  which  is  that  of 
worth  in  transfer  or  trade,  the  quality  that  a  thing  may 
have  of  ministering  indirectly  to  human  desire  through 
its  exchangeability  for  other  things,  was  distinguished  by 
Adam  Smith  as  "  value  in  exchange." 

Adam  Smith's  words  are  (Book  I.,  Chapter  IV.) : 

The  word  "  value,"  it  is  to  be  observed,  has  two  different  meanings, 
and  sometimes  expresses  the  utility  of  some  particular  object,  and 
sometimes  the  power  of  purchasing  other  goods  which  the  possession 
of  that  object  conveys.  The  one  may  be  called  "value  in  use ; n  the 
other,  "value  in  exchange."  The  things  which  have  the  greatest 
value  in  use  have  frequently  little  or  no  value  in  exchange ;  and,  on 
the  contrary,  those  which  have  the  greatest  value  in  exchange  have 
frequently  little  or  no  value  in  use.  Nothing  is  more  useful  than 
water ;  but  it  will  purchase  scarce  anything ;  scarce  anything  can  be 
had  in  exchange  for  it.  A  diamond,  on  the  contrary,  has  scarce  any 
value  in  use,  but  a  very  great  quantity  of  goods  may  frequently  be 
had  in  exchange  for  it. 

These  two  terms,  adopted  by  Adam  Smith,  as  best  ex- 
pressing the  two  distinct  senses  of  the  word  value,  at  once 
took  their  place  in  the  accepted  economic  terminology,  and 
have  since  his  time  been  generally  used. 

But  though  the  terms  of  distinction  which  he  used  have 
been  from  the  first  accepted,  this  has  not  been  the  case 
with  the  distinction  itself.  From  the  first,  his  successors 
and  commentators  began  to  question  its  validity,  declaring 
that  nothing  could  have  exchange  value  for  which  there 
was  not  demand ;  that  demand  implied  some  kind  of  utility 
or  usefulness,  and  hence  that  what  has  value  in  exchange 
must  also  have  value  in  use ;  and  that  Smith  had  been  led 
into  confusion  by  a  disposition  to  import  moral  distinc- 
tions into  a  science  that  knows  nothing  of  moral  distinc- 
tions. This  view  has  been  generally,  so  far  indeed  as  I 
know  universally,  accepted  by  political  economists.* 

*  There  is  a  latent  confusion  in  the  use  of  a  word  to  which  I  must 
here  call  attention,  as  I  have  in  previous  writings  slipped  into  this 


Cliap.X.  THE  TWO   SENSES  OF   VALUE.  215 

Thus,  John  Stuart  Mill  (whom  I  take  as  the  best  ex- 
ponent of  the  scholastically  accepted  political  economy  up 
to  the  time  when  the  Austrian  or  psychological  school 
began  to  become  the  "  fad  "  of  confused  professors),  begins 
his  treatment  of  value  by  pointing  out  that  "  the  smallest 
error  on  that  subject  infects  with  corresponding  error  all 
our  other  conclusions,  and  anything  vague  or  misty  in  our 
conceptions  of  it  creates  confusion  and  uncertainty  in 
everything  else."  And  he  thus  proceeds  ("  Principles  of 
Political  Economy,"  Book  III.,  Chapter  I.,  Sec.  1) : 

We  must  begin  by  settling  our  phraseology.  Adam  Smith,  in  a 
passage  often  quoted,  has  touched  upon  the  most  obvious  ambiguity 
of  the  word  "  value ; "  which,  in  one  of  its  senses,  signifies  usefulness, 
in  another,  power  of  purchasing ;  in  his  own  language,  value  in  use 
and  value  in  exchange.  But  (as  Mr.  De  Quincey  has  remarked)  in 
illustrating  this  double  meaning,  Adam  Smith  has  himself  fallen  into 
another  ambiguity.  Things  (he  says)  which  have  the  greatest  value 
in  use  have  often  little  or  no  value  in  exchange  ;  which  is  true,  since 
that  which  can  be  obtained  without  labor  or  sacrifice  will  command 
no  price,  however  useful  or  needful  it  may  be.  But  he  proceeds 


use  myself.  The  word  "  utility  "  correctly  expresses  the  idea  of  what 
gives  value  in  use— the  quality  of  usefulness.  And  the  word  "de- 
sirability "  is  sometimes  used  by  economists  to  express  the  contrasted 
idea,  of  what  gives  value  in  exchange^  the  quality  of  being  Desired, 
though  not  necessarily  satisfying  a  neectpr  useful  purpose.  Such  use 
seems  convenient  and  has  some  sanction  in  economic  writing,  and  I 
see  that  I  have  fallen  into  it  in  Part  L,  Chapter  V.,  of  my  "A  Per-  v 
plexed  Philosopher,"  where  I  say : 

"If  we  inquire  what  is  the  attribute  or  condition  concurring  with 
the  presence,  absence  or  degree  of  value  attaching  to  anything— we 
see  that  things  having  some  form  of  utility  or  desirability,  are  valu- 
able or  not  valuable,  as  they  are  hard  or  easy  to  get." 

Yet  in  reality  such  use  of  the  word  is  not  correct.  There  is  a  dif- 
ficulty in  using  the  word  "desirability"  in  distinction  to  "utility." 
"Utility"  means  the  capability  of  being  used,  and  by  analogy  "de- 
sirability" should  mean  the  capability  of  being  desired.  Yet  if  it 
did,  it  would  not  be  the  word  we  need  to  contrast  with  utility.  For 
words  of  distinction  must  be  words  of  restriction,  as  are  "utility" 


216  THE  NATURE  OF  WEALTH.  BoolcIL 

to  add,  that  things  which  have  the  greatest  value  in  exchange,  as  a 
diamond  for  example,  may  have  little  or  no  value  in  use.  This  is 
employing  the  word  "use,"  not  in  the  sense  in  which  political  economy 
is  concerned  with  it,  but  in  that  other  sense  in  which  use  is  opposed  to 
pleasure.  Political  economy  has  nothing  to  do  with  the  comparative 
estimation  of  different  uses  in  the  judgment  of  a  philosopher  or  of 
a  moralist.  The  use  of  a  thing,  in  political  economy,  means  its 
capacity  to  satisfy  a  desire,  or  serve  a  purpose.  Diamonds  have  this 
capacity  in  a  high  degree,  and  unless  they  had  it,  would  not  bear  any 
price.  Value  in  use,  or,  as  Mr.  De  Quincey  calls  it,  "teleologic" 
value,  is  the  extreme  limit  of  value  in  exchange.  The  exchange  value 
of  a  thing  may  fall  short,  to  any  amount,  of  its  value  in  use ;  but  that 
it  can  ever  exceed  the  value  in  use  implies  contradiction ;  it  supposes 
that  persons  will  give,  to  possess  a  thing,  more  than  the  utmost  value 
which  they  themselves  put  upon  it,  as  a  means  of  gratifying  their 
inclinations. 

The  word  "value,"  when  used  without  adjunct,  always  means,  in 
political  economy,  value  in  exchange. 


or  "usefulness  " — expressing  a  capability  in  some  things  which  other 
things  do  not  have.  "Desirability,"  however,  even  if  it  had  or  we 
could  give  it  the  sense  of  capability  of  being  desired,  would  not  be 
a  word  of  restriction,  since  anything  without  exception  may  be  de- 
sired, and  what  we  really  want  is  not  a  word  which  expresses  the 
capability  of  being  desired,  but  the  fact  of  being  desired.  "Desir- 
ability "  in  its  well-established  use,  however,  does  not  mean  the  capa- 
bility of  being  desired,  as  "utility"  means  the  capability  of  being  used. 
When  we  say  that  a  thing  is  desirable  or  undesirable,  we  do  not  mean 
that  it  may  or  may  not  be  desired,  nor  that  it  is  or  is  not  desired, 
but  that  it  ought  or  ought  not  to  be  desired.  Thus,  a  desirable 
exchange  or  trade  is  an  exchange  which,  wit-h  reference  to  the  party 
considered,  will  prove  a  good  one.  An  undesirable  exchange  is  one 
that  will  to  the  party  considered  prove  a  bad  one.  So  we  speak  of 
a  desirable  book,  horse,  beverage,  food,  medicine,  appetite,  habit, 
thought,  feeling  or  gratification,  with  reference  to  an  ultimate  benefit 
or  injury  to  the  person  or  persons  specially  considered  or  to  mankind 
generally.  So,  indeed,  we  may  speak  even  of  a  desirable  or  unde- 
sirable desire.  The  reason  why  there  is  no  word  in  the  English  lan- 
guage which  expresses  the  idea  I  wish  to  express,  and  which  if  at 
liberty  to  coin  a  word  I  should  call  "  desiredness, "  is  that  the  one 
word,  "value,"  serving  in  common  speech  for  both  senses,  there  is 
no  common  need  for  it. 


Chap.X.  THE  TWO  SENSES  OF  VALUE.  217 

Here  is  a  queer  settlement  of  phraseology.  Let  us  pick 
out  the  positive  statements.  They  are :  That  Adam  Smith 
was  wrong  in  saying  that  things  which  have  the  greatest 
value  in  exchange,  as  a  diamond,  may  have  little  or  no 
value  in  use,  because  the  use  of  a  thing  in  political  econ- 
omy, which  knows  nothing  of  any  moral  estimate  of  uses, 
means  its  capacity  to  satisfy  a  desire  or  serve  a  purpose— 
a  capacity  which  diamonds  have  in  high  degree,  and  unless 
they  had  it  would  not  have  any  value  in  exchange  ("bear 
any  price")-  Value  in  use  is  the  highest  possible  ("ex- 
treme limit  of  ")  value  in  exchange.  The  exchange  value 
of  a  thing  can  never  exceed  the  use  value  of  a  thing.  To 
suppose  that  it  could  implies  a  contradiction— that  persons 
will  give  to  possess  a  thing  more  than  its  utmost  use  value 
to  them  ("value  which  they  themselves  put  upon  it  as  a 
means  of  gratifying  their  inclinations  ")• 

In  this  there  is  a  complete  identification  of  value  in  use, 
utility  or  usefulness,  with  value  in  exchange,  exchange- 
ability or  purchasing  power.  What  then  becomes  of 
Mill's  other  statement  in  the  same  paragraph  ?  If  Adam 
Smith  was  wrong  in  saying  that  the  exchange  value  of  a 
thing  may  be  more  than  its  use  value,  how  could  he  be 
right  in  saying  that  the  exchange  value  of  a  thing  may  be 
less  than  its  use  value  ?  If  value  in  use  is  the  highest  limit 
of  value  in  exchange,  is  it  not  necessarily  the  lowest  limit  ? 
If  diamonds  derive  their  exchange  value  from  their  capacity 
to  satisfy  a  desire  or  serve  a  purpose,  do  not  beans  ?  If 
value  in  exchange  means  merely  value  in  use,  why  does 
Mr.  Mill  distinguish  between  the  twp  senses  of  the  word 
value,  that  of  usefulness,  and  that  of  purchasing  power? 
Why  does  he  tell  us  that  the  word  value,  when  used  with- 
out adjunct,  always  means  in  political  economy  value  in 
exchange?  Why  keep  up  a  distinction  where  there  is 
really  no  difference  ? 

In  this  identification  of  utility  with  "  desiredness  "  (which 
I  have  merely  quoted  Mill  to  illustrate,  for  it  began  imme- 


218  THE  NATURE  OF  WEALTH.  Book  II. 

diately  after  Adam  Smith,  and  was  well  rooted  in  the  cur- 
rent political  economy  long  before  Mill,  as  he  indeed 
declares,  saying  in  the  first  paragraph  of  his  treatment  of 
values,  "Happily  there  is  nothing  in  the  laws  of  value 
which  remains  for  the  present  or  any  future  writer  to  clear 
up ;  the  theory  of  the  subject  is  complete  ")  is  the  begin- 
ning of  that  theory  of  value  as  springing  from  marginal 
utilities  of  which  Jevons  was  the  first  English  expounder, 
and  which  has  been  carried  to  elaborate  development  by 
what  is  known  as  the  Austrian  or  psychological  school. 
This  school,  setting  aside  all  distinction  between  value  in 
use  and  value  in  exchange,  makes  value  without  distinc- 
tion an  expression  of  the  intensity  of  desire,  thus  tracing 
it  to  a  purely  mental  or  subjective  origin.  In  this  theory 
the  intensity  of  the  desire  of  the  bread-eater  to  eat  bread 
fixes  the  extreme  or  marginal  utility  of  bread.  This  again 
fixes  the  utility  of  the  products  of  which  bread  is  made— 
flour,  yeast,  fuel,  etc.— and  of  the  tools  used  in  making  it 
—ovens,  pans,  etc.— and  again  of  the  natural  materials 
used  in  making  these  products,  and  finally  of  the  land  and 
labor. 

But  all  this  elaborate  piling  of  confusion  on  confusion 
originates,  as  we  may  see  in  Mill,  in  a  careless  use  of 
words.  Nothing  indeed  could  more  strikingly  illustrate 
the  need  of  the  warning  as  to  the  use  of  words  in  political 
economy  which  I  endeavored  to  impress  on  the  reader  in 
the  introductory  chapter  of  this  work  than  the  spectacle 
here  presented  of  the  author  of  the  most  elaborate  work 
on  logic  in  the  English  language  falling  into  vital  error  in 
what  he  himself  declares  to  be  a  most  fundamental  ques- 
tion of  political  economy,  from  failure  to  apprehend  a 
distinction  in  the  meaning  of  two  common  words.  Yet 
here  plainly  enough  is  the  source  of  Mill's  acceptance  of 
what  much  inferior  thinkers  to  Adam  Smith  had  deemed 
a  correction  of  the  great  Scotsman.  The  gist  of  his  argu- 


Chap.X.  THE  TWO  SENSES  OF  VALUE.  219 

ment  is  that  the  capability  of  "  a  use,"  in  the  sense  of  sat- 
isfying a  desire  or  serving  a  purpose,  is  identical  with 
usefulness.  But  this  is  not  so.  Every  child  learns  long 
before  he  reaches  his  teens  that  the  capability  of  a  use  is 
not  usefulness.  Here,  for  instance,  is  a  dialogue  such  as 
every  one  who  has  gone  to  an  old-fashioned  primary  school 
or  mixed  as  a  boy  with  boys  must  have  heard  time  and 
again : 

First  Boy— What's  the  use  of  that  crooked  pin  you're 
bending  ? 

Second  Boy— What's  the  use !  Its  use  is  to  lay  it  on 
a  seat  some  fellow  is  just  going  to  sit  down  on,  and  to 
make  him  jump  and  squeal,  and  to  hear  the  teacher  charg- 
ing around  while  you're  busy  studying  your  lesson,  and 
don't  know  anything  about  what's  the  matter. 

This  is  certainly  a  use;  but  would  any  one,  even  a 
school-boy,  attribute  usefulness  to  such  a  use  ? 

So,  the  wearing  of  nose-rings  by  some  savages;  the 
tattooing  of  their  bodies  by  other  savages,  and  by  sailors ; 
the  squeezing  of  their  waists  by  civilized  women ;  the  mon- 
strous structures  into  which  the  hair  of  fashionable  Euro- 
pean ladies  was  built  in  the  last  century  •  the  hooped  skirts 
worn  during  a  part  of  this ;  the  pitiful  distortion  practised 
on  the  feet  of  upper-class  female  infants  by  the  Chinese, 
are  all  uses.  But  do  they  therefore  imply  usefulness  ? 

Again,  the  thumb-screws  brought  from  Russia  by  Drum- 
mond  and  Dalziel,  when  they  were  sent  to  Scotland  by 
Charles  II.  to  force  Episcopacy  upon  the  Covenanters,  had 
"  a  use."  The  racks  which  the  English  captors  of  the  ships 
of  the  Spanish  Armada  were  said  to  have  found  in  those 
vessels,  intended,  as  was  believed,  for  the  purpose  of  con- 
verting English  Protestants  to  the  true  faith  of  Rome,  had 
also  a  capacity  of  satisfying  a  devilish  desire.  They  had 
unquestionably  at  that  time  value  in  exchange,  and  indeed, 
if  still  in  existence,  would  have  value  in  exchange  now,  for 


220  THE  NATURE  OF  WEALTH.  Book  II. 

they  would  be  purchased  for  museums ;  and  I  do  not  see 
how  they  could  at  that  time  have  been  refused,  or  if  in 
existence,  could  now  be  refused,  a  place  in  any  category 
of  articles  of  wealth.  But  were  they  useful  articles  ?  No 
one  would  now  say  so.  There  were,  it  is  true,  at  that  time 
some  people  who  might  have  contended  for  their  useful- 
ness. But  consider  the  supposition  under  which  alone 
this  claim  for  their  usefulness  could  have  been  made,  for 
it  points  to  an  essential  distinction  between  the  meaning 
of  usefulness  and  that  of  mere  capacity  for  use.  The 
thumb-screws  and  racks  could  have  been  considered  as 
useful  only  on  the  assumption  that  the  eternal  salvation  of 
men,  their  exemption  from  endless  torture,  depended  on 
their  acceptance  of  certain  theological  beliefs,  and  there- 
fore that  the  rooting  out  of  schism  and  heresy,  even  by  the 
use  of  temporal  torture,  was  conducive  to  the  true  welfare 
and  final  happiness  of  the  generality  of  mankind. 

To  consider  this  is  to  see  that  what  is  really  the  essen- 
tial idea  of  usefulness,  of  that  quality  of  a  thing  which 
Adam  Smith  distinguished  as  utility  or  value  in  use,  is, 
not  the  capability  of  any  use,  but  the  capability  of  use  in 
the  satisfaction  of  the  natural,  normal  and  general  desires 
of  men. 

And  in  this  Adam  Smith,  following  the  Physiocrats, 
recognized  a  distinction  that  he  did  not  create,  and  that 
no  confusions  of  current  economic  teaching  can  eradicate ; 
a  distinction  that  does  not  come  from  the  refinements  of 
^philosophers  or  moralists,  but  that  rests  on  common  per- 
ceptions of  the  human  mind— the  distinction,  namely,  be- 
•  tween  things  which  in  themselves  or  in  their  uses  conduce 
/  to  well-being  and  happiness  and  the  things  which  in  them- 
j    selves  or  in  their  uses  involve  fruitless  effort  or  ultimate 
injury  and  pain.     The  capacity  of  satisfying  some  desire, 
no  matter  how  idle,  vicious  or  cruel,  is  indeed  all  that  is 
necessary  to  exchangeability  or  value  in  exchange.     But 


3  X  --  -, 


Chap.  X.  THE  TWO  SENSES  OF  VALUE.  221 

to  give  usefulness  or  value  in  use  something  more  is  neces- 
sary, and  that  is  the  capacity  to  satisfy,  not  any  possible 
desire,  but  those  desires  which  we  call  needs  or  wants,  and 
which,  lying  lower  in  the  order  of  desires,  are  felt  by  all    , 
men.* 

Value  in  use  and  value  in  exchange  may  and  often  do 
attach  to  the  same  things,  and,  as  a  matter  of  fact,  doubt- 
less the  great  majority  of  things  having  value  in  exchange 
have  also  value  in  use.  But  this  connection  is  not  neces- 
sary, and  the  two  qualities  have  no  relation  whatever  to 
each  other.  A  thing  may  have  use  value  in  the  highest 
degree,  yet  very  little  exchange  value  or  none  at  all.  A 
thing  may  have  exchange  value  in  very  high  degree  and 
little  or  no  use  value.  Air  has  the  highest  value  in  use, 
as  without  air  we  could  not  live  a  minute.  But  this 
supreme  utility  does  not  give  air  exchange  value.  The 
Bambino  of  Rome  or  the  Holy  Coat  of  Treves  could  prob- 
ably be  exchanged,  as  similar  venerated  objects  have  been 
at  times  exchanged,  for  enormous  sums ;  but  the  use  value 
of  the  one  is  that  of  a  wax  doll  baby,  that  of  the  other  an 
old  rag.  The  two  qualities  of  value  in  use  and  value  in 
exchange  are  as  essentially  different  and  unrelatable  as 
are  weight  and  color,  though  as  we  sometimes  speak  of 
heavy  browns  and  light  blues,  so  do  we  in  common  speech 
use  the  word  value  now  to  express  one  of  these  qualities 
and  now  the  other.  The  quality  of  value  in  use  is  an  in- 
trinsic or  inherent  quality  attaching  to  the  thing  itself,  and 
giving  to  it  fitness  to  satisfy  man's  needs.  It  cannot  have 
value  in  use  except  it  has  that,  and  as  it  has  that,  no  matter 
what  be  its  value  in  exchange.  And  its  use  value  is  the 
same  whether  much  can  be  obtained  for  it  in  exchange  or 
"  no  one  would  pick  it  up."  The  quality  of  value  in  ex- 
change, on  the  other  hand,  is  not  intrinsic  or  inherent. 

*  As  explained  in  Book  I.,  Chapter  XI. 


222  THE  NATURE  OF  WEALTH.  Book  II. 

There  is,  to  be  sure,  a  special  sense  in  which,  comf  orm- 
ably  to  usage,  we  may  speak  in  certain  cases  of  an  intrinsic 
value  as  applying  to  the  part  of  the  value  which  comes 
wholly  from  the  estimate  of  man,  and  where  in  reality  in- 
herent or  intrinsic  value  cannot  exist.  The  cases  in  which 
we  do  this  are  cases  in  which  we  wish  to  distinguish  be- 
tween the  exchange  value  which  a  thing  may  have  in  a 
higher  or  more  valuable  form  and  that  exchange  value 
which  still  remains  if  it  were  reduced  to  a  lower  or  less 
valuable  form.  Thus,  a  silver  pitcher  or  a  United  States 
silver  coin  would  loose  exchange  value  if  beaten  into  in- 
gots ;  or  a  coil  of  lead  pipe  or  a  ship's  anchor  and  cable 
would  lose  in  exchange  value  if  melted  into  pigs.  Yet 
they  would  retain  the  exchange  value  of  the  metal  from 
which  they  were  made.  This  value  in  exchange  which 
would  remain  in  a  lower  form  we  are  accustomed  to  speak 
of  as  "  intrinsic  value."  But  in  using  this  term  we  should 
always  remember  its  merely  relative  sense.  Value  in  the 
economic  sense,  or  value  in  exchange,  can  never  really  be 
intrinsic.  It  refers  not  to  any  property  of  the  thing  itself, 
but  to  an  estimate  that  is  placed  on  it  by  man— to  the  toil 
and  trouble  that  men  will  undergo  to  acquire  possession 
of  it,  or  the  amount  of  other  things  costing  toil  and  trouble 
that  they  will  give  for  it. 

Nor  is  there  any  common  measure  in  the  human  mind 
between  usefulness  and  exchangeability.  Whether  we 
most  esteem  a  thing  for  the  intrinsic  qualities  that  give  it 
usefulness,  or  for  its  intrinsic  quality  of  commanding  other 
things  in  exchange,  depends  upon  conditions. 

A  daring  fellow  recently  crossed  from  the  coast  of  Nor- 
way to  the  "United  States  in  a  sixteen-foot  boat.  Suppos- 
ing him  to  come  to  New  York,  and  one  of  our  hundredfold 
millionaires,  in  the  fashion  of  an  Arabian  Nights'  Sultan, 
to  say  to  him :  "  If  you  will  make  a  trip  at  my  direction 
you  may  fill  up  your  boat  at  my  expense  with  anything 


Chap.  X.  THE  TWO   SENSES  OF  VALUE.  223 

you  choose  to  take  from  New  York,  regardless  of  its  cost." 
What  would  he  fill  it  up  with?  That  could  not  be  an- 
swered in  a  word,  as  it  would  entirely  depend  upon  where 
the  millionaire  wanted  him  to  go.  If  he  were  merely  to 
cross  the  North  River  from  New  York  to  Jersey  City,  he 
would  disregard  value  in  use  and  fill  up  with  what  had  the 
highest  value  in  exchange,  in  comparison  to  bulk  and 
weight — gold,  diamonds,  paper  money.  To  carry  the  more 
of  these  he  would  leave  out  everything  having  value  in  use 
that  he  could  get  along  without  for  an  hour  or  two— even 
to  extra  sails,  anchor,  sea-drag,  compass,  a  morsel  of  food 
or  a  drink  of  water.  But  if  he  were  to  cross  the  Atlantic 
again,  his  first  care  would  be  for  things  useful  in  the 
management  of  his  boat  and  the  maintenance  of  his  own 
life  and  comfort  during  the  long  months  of  danger  and 
solitude  before  he  could  hope  again  to  reach  land.  He 
would  regard  value  in  use,  disregarding  value  in  exchange. 
If  he  had  not  lost  the  prudence  which,  no  less  than  daring, 
is  required  successfully  to  make  such  a  trip,  it  may  well  be 
doubted  whether  he  would  not  prefer  to  carry  its  weight 
in  fresh  water  than  to  take  a  single  diamond  or  gold  piece 
and  prefer  another  can  of  biscuit  or  condensed  beef  to 
the  last  bundle  of  thousand-dollar  notes  that  he  might  take 
instead. 

Adam  Smith  was  right.  The  distinction  between  value 
in  use  and  value  in  exchange  is  an  essential  one.  It  is  so 
clear  and  true  and  necessary  that,  as  we  have  seen,  John 
Stuart  Mill  could  not  refrain  from  partially  recognizing  it 
in  th'e  very  breath  in  which  he  had  eliminated  it  altogether, 
and  the  later  economists  who  have  carried  the  confusion 
which  he  expresses  to  a  point  of  more  elaborate  confusion 
are  also  compelled  to  recognize  it  the  moment  they  get  out 
of  the  fog  of  ill-understood  words.  Despite  all  attempts 
to  confuse  and  obliterate  them,  "  value  in  use  "  and  "  value 
in  exchange  "  must  still  hold  their  place  in  economic  ter- 


224  THE  NATURE  OP  WEALTH.  Book  II. 

miiiology.  The  terms  themselves  are  perhaps  not  the 
happiest  that  might  be  chosen.  But  so  long  have  they 
now  been  used  that  it  would  be  difficult  to  substitute  any- 
thing in  their  place.  It  is  only  necessary  to  do  what  Adam 
Smith  could  hardly  have  deemed  necessary— point  out 
what  they  really  mean.  They  were  taken  indeed  by  him 
from  common  speech,  and  still  retain  the  great  advantage 
to  any  economic  term  of  being  generally  intelligible. 

In  common  speech  the  one  word  value,  as  I  have  already 
said,  usually  suffices  to  express  either  value  in  use  or  value 
in  exchange.  For  which  sense  of  the  word  value  is  meant 
is  ordinarily  indicated  with  sufficient  clearness  either  by 
the  context  or  by  the  situation  or  nature  of  the  thing  spoken 
of.  But  in  cases  where  there  is  no  indication  thus  sup- 
plied, or  the  indication  is  not  sufficiently  clear,  the  use  of 
the  word  "value"  will  at  once  provoke  a  question  equivalent 
to  "  Do  you  mean  value  for  use  or  value  for  exchange  ? " 

Thus,  if  a  man  says  to  me,  "  That  is  a  valuable  dog,  he 
saved  a  child  from  drowning ;  "  I  know  that  the  value  he 
means  is  value  in  use.  If  he  says,  however,  "  That  is  a 
valuable  dog,  his  brother  brought  a  hundred  dollars ; "  I 
know  that  he  has  in  mind  value  in  exchange.  Even  where 
he  says  simply,  "  That  is  a  valuable  dog,"  there  is  generally 
some  indication  that  enables  me  to  tell  what  sense  of  value 
he  has  in  mind.  If  there  is  none,  and  I  am  interested 
enough  to  care,  I  ask  for  it  by  such  question  as  "  Why  ? " 
or  "What  for?" 

In  economic  reasoning,  however,  the  danger  of  using 
one  word  to  represent  two  distinct  and  often  contrasted 
ideas  is  very  much  greater  than  in  common  speech,  and  if 
the  word  is  to  be  retained,  one  of  its  senses  must  be 
abandoned.  Of  the  two  meanings  of  the  word  value,  the 
first,  that  of  value  in  use,  is  not  called  for,  or  called  for 
only  incidentally  in  political  economy ;  while  the  second, 
that  of  value  in  exchange,  is  called  for  continually,  for 


Chap.  X.  THE  TWO  SENSES  OF  VALUE.  225 

this  is  the  value  with  which  political  economy  deals.  To 
economize  the  use  of  words,  while  at  the  same  time 
avoiding  liability  to  misunderstanding  and  confusion,  it 
is  expedient,  therefore,  to  restrict  the  use  of  the  word 
value,  as  an  economic  term,  to  the  meaning  of  value  in 
exchange,  as  was  done  by  Adam  Smith,  and  has  since  his 
time  generally  been  followed ;  and  to  discard  the  use  of 
the  single  word  value  in  the  sense  of  value  in  use,  sub- 
stituting for  it  where  there  is  occasion  to  express  the 
idea  of  value  in  use,  and  the  close  context  does  not  clearly 
show  the  limitation  of  meaning,  either  the  term  "  value  in 
use  "  or  some  such  word  as  usefulness  or  utility.  This  I 
shall  endeavor  to  do  in  this  work— using  hereafter  the 
single  term  value,  as  meaning  purchasing  power  or  "  value 
\n  exchange." 


CHAPTER  XI. 

ECONOMIC   VALUE-ITS    REAL   MEANING   AND 
FINAL  MEASURE. 

SHOWING  HOW  VALUE  IN  EXCHANGE  HAS  BEEN  DEEMED  A 
RELATION  OP  PROPORTION ;  AND  THE  AMBIGUITY  WHICH 
HAS  LED  TO  THIS. 

The  conception  of  value  as  a  relation  of  proportion— It  is  really  a 
relation  to  exertion— Adam  Smith's  perception  of  this— His  rea- 
sons for  accepting  the  term  value  in  exchange — His  confusion 
and  that  of  his  successors. 

VALUE,  as  an  economic  term,  means,  as  we  have  seen, 
what  in  denning  it  from  the  other  sense  of  the  word 
value,  is  known  as  value  in  exchange,  or  exchangeability. 
And  to  this  meaning  alone  I  shall,  when  using  the  word 
value  without  adjunct,  hereafter  confine  it. 

But  from  what  does  this  quality  of  value  in  exchange, 
or  exchangeability,  proceed  ?  And  by  what  may  we  mea- 
sure it  ? 

^  As  to  this  the  current  teachings  of  political  economy 
are,  that  value,  the  quality  or  power  of  exchangeability,  is 
a  relation  between  each  exchangeable  thing  and  all  other 
exchangeable  things.  Thus,  it  is  said,  there  can  be  no 
general  increase  or  decrease  of  values,  since  what  one  val- 
uable thing  may  gain  in  exchange  power,  some  other  val- 
uable thing  or  things  must  lose  j  and  what  one  loses  some 

226 


Chap.  XL  ECONOMIC  VALUE.  227 

other  or  others  must  gain.  In  other  words,  the  relation 
of  value  being  a  relation  of  ratio  or  proportion,  any  change 
in  one  ratio  must  involve  reverse  changes  in  other  ratios, 
since  the  sum  total  of  ratios  can  neither  be  increased  nor 
diminished.  There  may  be  increase  or  decrease  of  value  ^ 
in  any  one  or  more  things,  as  compared  with  any  other 
one  or  more  things;  but  no  increase  or  decrease  in  all 
values  at  once.  ^l^^S:  ^or  i^ance,  may  increase  otJ 
diminish,  because  price  is  a  relation  of  exchangeability 
between  all  other  exchangeable  things  and  one  particular 
exchangeable  thing,  money;  and  increase  or  decrease  of 
price  (greater  or  less  exchangeability  of  other  things  for 
money)  involves  correlatively  decrease  or  increase  of  the 
exchangeability  of  money  for  other  things.  But  increase 
or  decrease  in  value  generally  (i.e.,  all  values)  is  a  contra- 
diction in  terms. 

This  view  has  a  certain  plausibility.  Yet  to  examine  it 
is  to  see  that  it  makes  value  dependent  on  value  without 
possibility  of  measurement  except  arbitrarily  and  rjla^. 
tiyeJ.Vj  by  comparing  one  value  with  another ;  that  it  leaves 
the  idea  of  value  swimming,  as  it  were,  in  vacancy,  with- 
out connection  or  fixed  starting-point,  such  as  we  attach 
to  all  other  qualities  of  relation,  and  without  which  any 
definite  idea  of  relation  is  impossible. 

Thus,  such  qualities  as  size,  distance,  direction,  color, 
consanguinity  and  the  like  are  only  comprehensible  and 
intelligible  to  us  by  reference  to  some  fixed  starting-point, 
to  which  and  not  to  all  other  things  having  the  same 
quality  the  relation  is  made.  Size  and  distance,  for  in- 
stance, are  comprehended  and  intelligibly  expressed  as 
relations  to  certain  measures  of  extension,  such  as  the 
barleycorn,  the  foot,  the  meter,  diameters  of  the  earth,  or 
diameters  of  the  earth's  orbit ;  direction,  as  a  relation  to 
the  radii  of  a  sphere,  which,  proceeding  from  a  central 
point,  would  include  all  possible  directions;  color,  as  a 


228  THE  NATURE  OF  WEALTH.  Book  II. 

relation  to  the  order  in  which  certain  impressions  are  re- 
ceived through  the  human  eye ;  consanguinity,  as  a  relation 
in  blood  to  the  primary  blood-relationship,  that  between 
parent  arid  child  j  and  so  on. 

Now,  has  not  also  the  idea  of  value  some  fixed  starting- 
point,  by  which  it  becomes  comprehensible  and  intelligible, 
as  have  all  other  ideas  of  relation  ? 

Clearly  it  has.  What  the  idea  of  value  really  springs 
from,  is  not  the  relation  of  each  thing  having  value  to  all 
things  having  value,  but  the  relation  of  each  thing  having 
value  to  something  which  is  the  source  and  natural  mea- 
sure of  all  value— namely,  human  exertion,  with  its  atten- 
dant irksomeness  or  weariness. 

Adam  Smith  saw  this,  though  he  may  not  have  consis- 
tently held  to  it,  as  was  the  case  with  some  other  things  he 
clearly  saw  for  a  moment,  as  through  a  rift  in  clouds  which 
afterwards  closed  up  again.  In  the  first  paragraphs  of 
Chapter  V.,  Book  I.,  "  Wealth  of  Nations,"  he  says : 

Every  man  is  rich  or  poor  according  to  the  degree  in  which  he 
can  afford  to  enjoy  the  necessaries,  conveniences  and  amusements  of 
human  life.  But  after  the  division  of  labor  has  once  thoroughly 
taken  place,  it  is  but  a  very  small  part  of  these  with  which  a  man's 
own  labor  can  supply  him.  The  far  greater  part  of  them  he  must 
derive  from  the  labor  of  other  people,  and  he  must  be  rich  or  poor 
according  to  the  quantity  of  that  labor  which  he  can  command,  or 
which  he  can  afford  to  purchase.  The  value  of  any  commodity, 
therefore,  to  the  person  who  possesses  it,  and  who  means  not  to  use 
or  consume  it  himself,  but  to  exchange  it  for  other  commodities,  is 
equal  to  the  quantity  of  labor  which  it  enables  him  to  purchase  or 
command.  Labor,  therefore,  is  the  real  measure  of  the  exchangeable 
value  of  all  commodities. 

The  real  price  of  everything,  what  everything  really  costs  to  the 
man  who  wants  to  acquire  it,  is  the  toil  and  trouble  of  acquiring  it. 
What  everything  is  really  worth  to  the  man  whoMs~acquired  it,  and 
who  wants  to  dispose  of  it  or  exchange  it  for  something  else,  is  the 
toil  and  trouble  which  it  can  save  to  himself,  and  which  it  can  impose 
upon  other  people.  What  is  bought  with  money  or  with  goods  is 
purchased  by  labor,  as  much  as  what  we  acquire  by  the  toil  of  our 


Chap.  XL  ECONOMIC  VALUE.  229 

own  body.  That  money  or  those  goods  indeed  save  us  this  toil. 
They  contain  the  value  of  a  certain  quantity  of  labor,  which  we  ex- 
change for  what  is  supposed  at  the  time  to  contain  the  value  of  an 
equal  quantity.  Labor  was  the  first  price,  the  original  purchase 
money  that  was  paid  for  all  things.  It  was  not  by  gold  or  by  silver, 
but  by  labor,  that  all  the  wealth  of  the  world  was  originally  pur- 
chased; and  its  value,  to  those  who  possess  it,  and  who  want  to 
exchange  it  for  some  new  productions,  is  precisely  equal  to  the 
quantity  of  labor  which  it  can  enable  them  to  purchase  or  command. 
Wealth,  as  Mr.  Hobbes  says,  is  power.  But  the  person  who  either 
acquires  or  succeeds  to  a  great  fortune,  does  not  necessarily  acquire 
or  succeed  to  any  political  power,  either  civil  or  military.  His  for- 
tune may  perhaps  afford  him  the  means  of  acquiring  both,  but  the 
mere  possession  of  that  fortune  does  not  necessarily  convey  to  him 
either.  The]  power  which  that  possession  immediately  and  directly 
conveys  to  him  is  the  power  of  purchasing ;  a  certain  command  over 
all  the  labor,  or  over  all  the  produce  of  labor  which  is  then  in  the 
market.  His  fortune  is  greater  or  less  precisely  in  proportion  to  the 
extent  of  this  power ;  or  to  the  quantity  of  other  men's  labor,  or, 
what  is  the  same  thing,  of  the  produce  of  other  men's  labor  which  it 
enables  him  to  purchase  or  command.  The  exchangeable  value  of 
everything  must  always  be  precisely  equal  to  the  extent  of  this 
power  which  it  will  convey  to  its  owner. 

This  is  perfectly  clear,  if  we  attend  only  to  the  meaning 
Adam  Smith  puts  upon  the  words  he  uses  somewhat 
loosely.  The  sense  in  which  he  uses  the  word  labor  is 
that  of  exertion,  with  its  inseparable  attendants,  toil  and 
trouble.  What  he  means  by  price,  is  cost  in  toil  and 
trouble,  as  he  indeed  incidentally  explains,*  and  by  wealth 

*  "Price,"  as  an  economic  term,  has  come  to  mean  value  in  terms 
of  money,  or  at  least  in  terms  of  one  particular  commodity ;  but  Adam 
Smith  did  not  make  this  distinction.  He  uses  the  word  "price" 
sometimes  where  he  means  "cost,"  and  sometimes  where  he  means 
"value."  This  use  of  price  for  value  he  once  in  a  while  indicates, 
as  where,  in  Chapter  VI.,  he  speaks  of  ")price  or  exchangeable  value," 
but  in  general  he  leaves  it  to  inference.  Where  it  is  necessary  for 
him  to  make  the  distinction  between  what  we  now  call  value  and 
what  we  now  call  price,  he  usually  speaks  of  the  one  as  "  real  price  " 
and  of  the  other  as  "  nominal  price,"  meaning  by  " re 
in  labor,  and  by  "  nominal  price  "  value  in  money. 


c 


230  THE  NATURE  OF  WEALTH.  Book  II. 

he  evidently  means  the  products  or  tangible  results  of 
human  exertion.  What  he  says  is  that  value  is  the  equiva- 
lent of  the  toil  and  trouble  of  exertion,  and  that  its  mea- 
sure is  the  amount  of  toil  and  trouble  that  it  will  save  to 
the  owner  or  enable  him  by  exchange  to  induce  others  to 
take  for  him. 

And  he  again  repeats  this  statement  a  little  further  on 
in  the  same  book : 

I  Equal  quantities  of  labor,  at  all  times  and  places,  may  be  said  to 
be  of  equal  value  to  the  laborer.  In  Ms  ordinary  state  of  health, 
strength  and  spirits ;  in  the  ordinary  degree  of  his  skill  and  dexterity, 
he  must  always  lay  down  the  same  portion  of  his  ease,  his  liberty, 
and  his  happiness.  The  price  which  he  pays  must  always  be  the 
same,  whatever  may  be  the  quantity  of  goods  which  he  receives  in 
return  for  it.  Of  these  indeed  it  may  sometimes  purchase  a  greater 
and  sometimes  a  smaller  quantity ;  but  it  is  their  value  which  varies, 
not  that  of  the  labor  which  purchases  them.  At  all  times  and  places 
that  is  dear  which  it  is  difficult  to  come  at,  or  which  it  costs  much 
labor  to  acquire ;  and  that  cheap  which  is  to  be  had  easily,  or  with 
very  little  labor.  Labor  alone,  therefore,  never  varying  in  its  own 
value,  is  alone  the  ultimate  and  real  standard  by  which  the  value  of 
all  commodities  can  aTaTrtimes  ajfd~pla"cT3S"be  estimated  and  com- 
pared. It  is  their  real  price  ;  money  is  their  nominal  price  only.  .  .  . 
Labor,  therefore,  it  appears  evidently,  is  the  only  universal,  as  well 
as  the  only  accurate  measure  of  value,  or  the  only  standard  by  which 
we  can  compare  the  values  of  different  commodities  at  all  times  and 
at  all  places. 

How  then  is  it  that  Adam  Smith,  when  he  needed  a 
term  which  should  express  the  second  sense  of  the  word 
value,  did  not  adopt  a  phrase  that  would  bring  out  the 
fundamental  meaning  of  value  in  this  sense,  such,  for  in- 
stance, as  "  value  in  toil/7  or  "  value  in  exertion,"  or  "  value 
in  labor ; "  but  instead  of  any  of  them  chose  a  phrase, 
"value  in  exchange,"  which  refers  directly  to  only  a 
secondary  and  derivative  meaning  ? 

The  reasons  he  himself  gives,  in  what  immediately  fol- 
lows the  first  two  paragraphs  I  have  quoted : 


Chap.  XL  ECONOMIC  VALUE.  231 

But  though  labor  be  the  real  measure  of  the  exchangeable  value 
of  all  commodities,  it  is  not  that  by  which  their  value  is  commonly 
estimated.  It  is  often  difficult  to  ascertain  the  proportion  between 
two  different  quantities  of  labor.  The  time  spent  in  two  different 
sorts  of  work  will  not  always  alone  determine  this  proportion.  The 
different  degrees  of  hardship  endured,  and  of  ingenuity  exercised, 
must  likewise  be  taken  into  account.  There  may  be  more  labor  in 
an  hour's  hard  work  than  in  two  hours'  easy  business  ;  or  in  an  hour's 
application  to  a  trade  which  it  cost  ten  years'  labor  to  learn,  than  in 
a  month's  industry  at  an  ordinary  and  obvious  employment.  But  it 
is  not  easy  to  find  any  acejjii'aj^measure  either  of  hardship  or  inge- 
nuity. In  exchanging,  indeed,  the  different  productions  of  different 
sorts  of  labor  for  one  another,  some^aJlQwajice  is^commonly  made  for 
both.  It  is  adjusted,  however,  not  by  any  accurate  measure,  but  by 
the  higgling  and  the  bargaining  of  the  market,  according  to  that  sort 
of  rough  equality  which,  though  not  exact,  is  yet  sufficient  for  carry- 
ing on  the  business  of  common  life.  ) 

Every  commodity,  besides,  is  more  frequently  exchanged  for,  and 
thereby  compared  with,  other  commodities  than  with  labor.  It  is 
more  natural  therefore  to  estimate  its  exchangeable  value  by  the 
quantity  of  some  other  commodity,  than  by  that  of  the  labor  which 
it  can  purchase.  The  greater  part  of  people,  too,  understand  better 
what  is  meant  by  a  quantity  of  a  particular  commodity  than  by  a 
quantity  of  labor.  The  one  is  a  plain  and  palpable  object ;  the  other 
an  abstract  notion,  which,  though  it  can  be  made  sufficiently  intelli- 
gible, is  not  altogether  so  natural  and  obvious. 

There  are  here  two  reasons  assigned  for  the  choice  of 
the  term  "  value  in  e&cEange,"  to  denote  what  Smith  saw 
with  perfect,  though  only  momentary  clearness,  really  to 
mean  "  value  in  exertion,"  or  in  the  phraseology  he  uses, 
"  value  in  labor." 

The  first,  and  it  is  a  weighty  one,  is  that  the  term  "  value 
in  exchange"  was  already  familiar,  and  would  be  best 
understood  in  bringing  out  the  distinction  he  wished  to 
dwell  upon— the  difference  between  value  in  the  economic 
sense  and  "value  in  use." 

The  second,  which  indicates  a  confusion  in  the  philoso- 
pher's own  mind— the  swiftness  with  which  the  clouds 
drifted  over  the  star  he  had  just  seen— is  that  he  could 


232  THE  NATUEE  OF   WEALTH.  Book  11. 

think  of  nothing  by  which  to  measure  the  toil  and  trouble 
of  exertion  except  time  of  application,  which  he  truly  saw 
could  only  measure  quantity  and  not  quality— that  is  to 
say,  duration,  not  intensity.  He  failed  to  recognize  the 
obvious  fact  that  if  the  toil  and  trouble  of  exertion  dis- 
pensed with  be  the  measure  of  value,  then,  correlatiyelv, 
value  must  be  the  real  measure  of  the  toil  and  trouble  of 
that  exertion,  and  that  the  something  he  was  seemingly 
looking  for— some  material  thing  or  attribute  which,  as  a 
yardstick  measures  length  and  a  standard  weight  mea- 
sures mass,  should,  independent^  of  "  the  higgling  of  the 
market,"  measure  the  toil  and  trouble  of  exertion— is  not  to 
be  found,  because  it  cannot  exist,  the  only  possibility  of 
such  a  measurement  lying  in  "the  higgling  of  the  market." 
For  since  toil  and  trouble,  which  constitute  the  resistance 
to  exertion,  are  subjective  feelings  which  cannot  be  objec- 
tively recognized  until  brought,  through  their  influence 
upon  action,  into  the  objective  field,  there  is  no  way  of 
measuring  them  except  by  the  inducement  that  will  tempt 
men  to  undergo  them  in  exertion,  which  can  be  determined 
only  by  competition  or  "the  higgling  of  the  market." 

So,  for  a  good  reason  and  a  bad  reason,  Adam  Smith, 
for  the  purpose  of  expressing  the  economic  sense  of  the 
word  value,  chose  the  term  "value  in  exchange."  It 
would  be  too  much  to  say  that  he  made  a  bad  choice, 
especially  considering  his  time  and  the  main  purpose  he 
had  in  mind,  which  was  to  show  the  absurdity  of  what 
was  then  called  the  mercantile  system,  and  has  since  been 
re-christened  the  protective  system.  But  the  ambiguity 
\  involved  in  the  term  "value  in  exchange"  has  been  a 
stumbling-block  in  political  economy  from  his  day  to  this, 
and,  indeed,  to  the  ambiguity  concealed  in  his  own  chosen 
term  Adam  Smith  himself  fell  a  victim.  Or  perhaps, 
rather,  it  should  be  said,  that  the  ambiguity  of  the  term 
allowed  him  to  retain  confusions  that  were  already  in  his 


Chap.  XL  ECONOMIC  VALUE.  233 

mind,  save  when  in  the  paragraphs  just  quoted  he 
momentarily  brushed  them  away,  only  to  have  them  recur 
again.  It  will  be  noticed  that,  in  these  paragraphs,  Smith 
clearly  distinguishes  between  labor  and  commodities,  evi- 
dently meaning  by  commodities  things  produced  by  labor  j 
and  that  he  seems  clearly  to  understand  by  wealth  the 
products  of  labor.  But  in  other  places  he  drops  into  the 
confusion  of  treating  labor  itself  as  a  commodity,  and  of 
classing  personal  qualities,  such  as  industry,  skill,  know- 
ledge, etc.,  as  articles  of  wealth $  just  as,  in  Chapter  VIII., 
he  clearly  sees  and  correctly  states  the  true  origin  and 
nature  of  wages  where  he  says:  "The  produce  of  labor 
constitutes  the  natural  recompense  or  wages  of  labor," 
only  almost  immediately  to  abandon  it  and  proceed  to 
treat  wages  as  supplied  from  the  capital  of  the  employer. 
Adam  Smith  was  never  called  upon  to  revise  or  in  any 
way  to  reconsider  the  statement  of  his  great  book  as  to 
the  nature  of  value,  the  discussion  on  the  subject  having 
arisen  since  his  death.  His  successors  in  political  economy 
have  been  with  few  exceptions,  not  men  of  original 
thought,  but  the  mere  imitators,  compilers  and  straw- 
splitters  who  usually  follow  a  great  work  of  genius.  They 
have,  without  looking  further,  accepted  the  term  used  by 
him,  "  value  in  exchange,"  not  merely  in  the  same  way 
that  he  accepted  it,  as  a  convenient,  because  a  readily 
understood,  name  for  a  quality,  but  as  expressing  the  na- 
ture of  that  quality.  Thus  Adam  Smith's  explanation  of  ^ 
the  essential  relation  of  value  to  the  exertion  of  labor  has 
been  virtually,  if  not  utterly,  ignored.  And  from  looking  ) 
further  than  exchangeability  for  an  explanation  of  the 
nature  of  value,  these  succeeding  economists  have  been 
dissuaded  and  debarred  not  only  by  certain  facts  not  un- 
derstood, such  as  the  fact  that  many  things  having  value 
do  not  originate  in  labor,  and  by  erroneous  conceptions, 
such  as  that  which  treats  labor  itself  as  a  commodity  j  but 


234  THE  NATURE  OF  WEALTH.  BooTcIL 

by  a  greatly  effective,  though  doubtless  in  most  cases  a 
very  vague  recognition  of  the  fact  that  danger  to  existing 
social  institutions  would  follow  any  too  searching  an 
inquiry  into  the  fundamental  principle  of  value.  A  world 
of  ingenuity  has  been  expended  and  monstrous  books  have 
been  written  that  it  will  tire  a  man  to  read  and  almost 
make  him  doubt  his  own  sanity  to  try  to  understand,  to 
solve  the  problem  of  the  fundamental  nature  of  value  in 
exchange.  Yet  they  have  resulted  in  what  are  but  pon- 
derous elaborations  of  confusion,  for  the  good  and  sufficient 
reason  that  the  essence  or  foundation  of  what  we  call  value 
in  exchange  does  not  lie  in  exchangeability  at  all,  but  in 
something  from  which  exchangeability  springs— the  toil 
and  trouble  attendant  upon  exertion. 

Let  me  endeavor,  even  at  some  length,  to  prove  this  in 
a  succeeding  chapter,  for  most  vital  and  far-reaching  eco- 
nomic issues  are  involved  in  this  settlement  of  the  meaning 
of  a  term. 


CHAPTER  XII. 

VALUE  IN  EXCHANGE   REALLY  RELATED 
TO   LABOR. 

SHOWING  THAT  VALUE  DOES  NOT  COME  FROM  EXCHANGE- 
ABILITY, BUT  EXCHANGEABILITY  FROM  VALUE,  WHICH  IS 
AN  EXPRESSION  OF  THE  SAVING  OF  LABOR  INVOLVED  IN 
POSSESSION. 

Root  of  the  assumption  that  the  sum  of  values  cannot  increase  or 
diminish— The  fundamental  idea  of  proportion— We  cannot  really 
think  of  value  in  this  way— The  confusion  that  makes  us  imagine 
that  we  do— The  tacit  assumption  and  reluctance  to  examine  that 
bolster  the  current  notion — Imaginative  experiment  shows  that 
value  is  related  to  labor — Common  facts  that  prove  this — Current 
assumption  a  fallacy  of  undistributed  middle— Various  senses  of 
"labor"— Exertion  positive  and  exertion  negative— Ee-statement 
of  the  proposition  as  to  value — Of  desire  and  its  measurement — 
Causal  relationship  of  value  and  exchangeability — Imaginative 
experiment  showing  that  value  may  exist  where  exchange  is  im- 
possible—Value an  expression  of  exertion  avoided. 

IjlROM  the  assumption  that  economic  value  is  not  merely 
J?  what  we  have  found  it  convenient  to  call  value  in 
exchange,  but  in  reality  is  exchangeability— a  quality  of 
power  by  which  the  owner  of  a  valuable  thing  may,  by 
surrendering  his  ownership  to  some  one  else,  obtain  from 
him  by  similar  transfer  the  ownership  of  another  valuable 
thing— value  is  thought  of  as  proceeding  from  value,  and 
existing  in  a  circle  of  which  each  part  must  have  a  relation 
of  proportion  or  ratio  to  all  other  parts.  It  is  this  that 

235 


236  THE  NATURE  OF  WEALTH.  Book  IL 

gives  axiomatic  semblance  to  the  proposition  that  while 
there  may  be  increase  or  decrease  in  some  values,  this 
must  always  involve  reversely  decrease  or  increase  in  some 
other  values,  and  hence  that  increase  or  decrease  of  all 
values,  or  of  the  sum  of  values,  is  impossible.  If  value  be 
really  a  relation  of  proportion,  this  indeed  is  self-evident. 

But  is  value  really  a  relation  of  proportion  or  ratio  ? 
What  is  the  fundamental  idea  of  proportion  or  ratio  ?  Is 
it  not  that  of  the  relation  of  the  parts  of  a  whole  to  that 
whole?  When  we  use  such  a  phrase  as  one-eighth  we 
mean  the  relation  of  a  part  represented  as  one  of  eight 
equal  partitions  to  a  whole  represented  by  one.  When  we 
use  such  a  phrase  as  10  per  cent,  we  mean  a  relation  of  a 
part  represented  by  ten  of  100  equal  partitions  to  a  whole 
represented  by  100.  So  such  propositions  as  J  +  J  =  J ; 
or  .153 +  .147  =  .3;  or  4  :  8  :  :  6  :  12  ;  or5%  +  4%  =  9%, 
depend  for  their  validity  upon  the  relations  of  the  propor- 
tions spoken  of  to  a  whole  or  totality,  which  is  the  sum  of 
all  possible  proportions.  That  there  cannot  be  increase  or 
decrease  in  all  proportions  follows  from  the  axiom  that  a 
whole  is  equal  to  the  sum  of  its  parts. 

But  if  value  be  a  relation  of  proportion  or  ratio,  what 
is  the  whole  which  it  implies  ?  How  shall  we  express  this 
totality?  Or  by  what  calculus  shall  we  fix  the  relations 
of  its  parts,  the  numberless  and  constantly  changing  arti- 
cles of  value  ?  Might  we  not  as  well  try  to  think  of  or 
express  the  relation  of  each  particular  hair  of  our  heads  to 
the  sum  of  the  hairs  in  the  heads  of  all  humanity  ? 

The  truth  is  that  we  cannot  think  of  value  in  this  way, 
nor  do  we  really  try  to,  and  the  more  ingenious  and  elabo- 
rate the  attempts  that  have  been  made  to  give  something 
like  solid  support  and  logical  coherency  to  the  prevailing 
theory  that  value  is  really  nothing  more  than  exchange- 
ability only  the  more  clearly  show  its  utter  inadequacy. 
Thus  the  latest  and  most  elaborate  of  these  attempts,  that 


Chap.  XII.     VALUE  IN  EXCHANGE  AND  LABOR.  237 

of  the  Austrian  or  psychological  school,  which  has  been  of 
recent  years  so  generally  accepted  in  the  universities  and 
colleges  of  the  United  States  and  England,  and  which  de- 
rives value  from  what  it  calls  "  marginal  utilities/'  is  an 
attempt  to  emulate  in  economic  reasoning  the  stories  told 
of  East  Indian  jugglers,  who  throwing  a  ball  of  thread  into 
the  air;  pull  up  by  it  a  stouter  thread,  then  a  rope,  and 
finally  a  ladder,  on  which  they  ascend  until  out  of  sight, 
and  then— come  down  again ! 

For  whoever  will  work  his  way  through  the  perplexities 
of  their  reasoning  will  find  that  the  adherents  of  this  school 
derive  the  value  of  pig-iron,  for  instance,  or  even  of  iron 
ore  in  the  vein,  from  the  willingness  of  consumers  to  pay 
for  higher  and  more  elaborate  products  into  the  produc- 
tion of  which  iron  enters,  deriving  that  willingness  from 
a  mental  estimate  on  the  part  of  consumers  of  the  utility 
of  these  products  to  them.  Thus,  as  coolly  as  such  stories 
of  Indian  jugglers  ignore  the  law  of  gravitation,  do  they 
ignore  that  law  which  to  political  economy  is  what  gravi- 
tation is  to  physics,  the  law  that  men  seek  to  satisfy  their 
desires  with  the  least  exertion— a  law  from  which  proceeds 
the  universal  fact  that  as  a  matter  of  exchange  no  one  will 
pay  more  for  anything  than  he  is  obliged  to. 

These  elaborate  attempts  to  link  value  on  utility,  and 
utility  on  individual  will  or  perception,  in  order  to  find  a 
support  for  the  idea  of  value,  only  show  that  there  is  no 
resting-place  in  the  supposition  that  value  proceeds  from 
exchangeability,  and  can  only  be  relative  to  other  values. 
The  plausibility  of  this  supposition  comes  from  confusion 
in  the  use  of  a  simple  word. 

Of  all  words  in  common  use  in  the  English  tongue  the 
word  "  thing  "  is  the  widest.  It  includes  whatever  may  be 
an  object  of  thought— an  atom  or  a  universe ;  a  fact  or  a 
fancy ;  what  comes  into  consciousness  through  our  senses 
and  what  constitutes  the  peopling  and  furniture  of  our 


238  THE  NATURE  OF  WEALTH.  BookIL 

dreams;  that  which  analysis  cannot  further  resolve  and 
that  which  has  no  other  coherence  than  a  verbal  habit  or 
mistake.  But  this  comprehensiveness  of  the  word  we  are 
sometimes  apt  to  forget,  or  not  fully  to  keep  in  mind,  and 
to  use  such  phrases  as  "all  things"  or  "anything"  when 
we  really  have  in  mind  only  things  of  one  particular  kind. 
When  we  wish  [ to  test  the  proposition  that  value  is  a 
relation  of  exchangeability  between  valuable  things,  we 
usually  proceed  to  make  a  mental  experiment  with  some 
few  valuable  things,  for  it  would  be  impossible  to  take 
them  all,  and  tiresome  to  attempt  it.  For  the  things  se- 
lected for  this  experiment  we  are  apt,  as  examination  and 
observation  will  show,  and  as  is  evident  in  the  writings  of 
economists,  to  take  such  things  as  are  most  widely  known 
and  commonly  exchanged,  turning  the  particular  into  the 
general  when  required,  by  the  formula,  expressed  or  im- 
plied, "and  other  valuable  things."  Thus,  for  instance, 
we  think  of  money,  or  as  the  most  widely  known  repre- 
sentative of  money,  a  piece  of  gold,  and  say  to  ourselves : 
"  Here  is  a  piece  of  gold.  Why  is  it  valuable  ?  It  is  that 
it  can  be  exchanged  for  wheat,  hardware,  cotton  goods  and 
other  valuable  things.  If  it  could  not  be  so  exchanged  it 
would  have  no  value,  and  the  measure  of  its  value  is  the 
value  of  the  wheat,  hardware,  cotton  goods  and  other  val- 
uable things  for  which  it  is  exchangeable.  If  the  relation 
of  exchangeability  alters  so  that  for  the  same  piece  of  gold 
one  can  obtain  more  wheat,  hardware,  cotton  goods  and 
other  valuable  things,  the  value  of  the  gold  rises,  and  that 
of  the  other  valuable  things  falls.  If  the  relation  of  ex- 
changeability alters  so  that  the  piece  of  gold  will  exchange 
for  less  of  these  things,  the  value  of  the  gold  falls  and  that 
of  the  other  things  rises."  Then,  we  reverse  the  standpoint 
of  examination,  taking  in  turn  wheat,  hardware  or  cotton 
goods,  as  representative  of  a  particular  instance  of  value, 
and  gold,  as  representing  other  valuable  things ;  and  seeing 


Chap.  XII.     VALUE  IN  EXCHANGE  AND  LABOK.  239 

that  their  value  depends  upon  their  exchangeable  relation 
in  the  same  way  as  that  of  gold  in  our  first  experiment, 
we  conclude  that  value  is  indeed  a  relation  of  exchange- 
ability, and  that  that  is  the  beginning  and  end  of  it. 

Thus,  that  value  depends  on  value,  and  springs  from 
value  and  can  only  be  measured  by  value— that  is,  by  the 
selection  of  some  particular  article  having  value,  from 
which  relatively  and  empirically  the  value  of  other  articles 
may  be  measured— seems  to  us  perfectly  clear,  and  we 
accept  the  doctrine  that  there  can  be  no  general  increase 
or  decrease  in  values,  as  if  it  were  but  another  statement 
of  the  axiom  that  a  whole  is  equal  to  the  sum  of  its  parts, 
and  consequently  that  all  those  parts  can  never  be  increased 
or  diminished  at  the  same  time.  The  habitual  use  of  money 
as  a  common  measure  of  value  is  apt  to  prevent  any  reali- 
zation of  the  fact  that  we  are  reasoning  in  a  circle. 

I  think  I  have  correctly  described  the  line  of  reasoning 
which  makes  the  derivation  of  value  from  exchangeability 
so  plausible.  I  do  not  of  course  mean  to  say  that  labor  is 
never  taken  into  account.  It  is  often  expressly  mentioned 
and  always  implied  to  be  one  of  the  valuable  things  in  the 
category  of  valuable  or  exchangeable  things.  But  the 
weight  of  the  examination  is,  I  think,  always  thrown  upon 
such  things  as  I  have  named— things  resulting  from  the 
exertion  of  labor ;  while  labor  itself  is  passed  over  lightly 
as  one  of  the  "  other  valuable  things, "  and  attention  never 
rests  upon  it. 

And,  furthermore,  I  am  inclined  to  think  that  there 
always  lurks  in  this  examination— which  is  in  reality  an 
examination  of  the  relative  value  of  products  of  labor— 
the  tacit  assumption  that  the  quantity  of  the  valuable 
things  (thought  of  as  products  of  labor)  existing  at  the 
specific  moment  presumed  in  the  examination  is  a  fixed 
quantity,  so  that  there  can  be  no  exchange  between  those 
possessed  of  valuable  things  (i.e.j  products  of  labor)  and 


240  THE  NATURE  OF  WEALTH.  Book  II. 

those  possessed  of  no  valuable  things  (i.e.,  no  products  of 
labor).  This,  I  think,  is  the  case  even  where  there  is  an 
assumption  of  giving  the  value  of  labor  a  place  in  the 
category  of  considered  values,  for  what  the  reputed  econ- 
omists since  Smith  have  called  the  "  value  of  labor"  is  in 
reality  the  value  of  the  products  of  labor  paid  to  laborers 
in  wages,  which  has  been  usually  assumed  to  come  from  a 
(at  any  given  moment)  fixed  quantity,  capital.  And  on 
another  side,  any  rigorous  examination  of  the  nature  of 
value  has  been  prevented  by  the  universal  disposition  of 
economists,  not  really  questioned  until  "  Progress  and 
Poverty"  was  published,  to  slur  over  the  nature  of  the 
value  of  land,  and  practically  to  assume,  what  was  indeed 
the  common  assumption,  that  it  was  of  the  same  origin  as 
the  value  attaching  to  such  things  as  gold,  wheat,  hard- 
ware, cotton  goods  or  similar  products  of  labor. 

That  it  takes  two  to  make  an  exchange,  as  certainly  as 
"  it  takes  two  to  make  a  quarrel,"  is  clear.  But  that  value 
in  one  person's  hands  does  not,  as  is  impliedly  or  expressly 
taught  in  economic  works,  necessarily  involve  the  existence 
of  value  in  the  hands  of  others,  may  be  seen  by  another 
imaginative  experiment  : 

Let  us  imagine  some  remote  and  as  yet  undiscovered 
island,  where  men  still  live  as  in  the  Biblical  account  our 
first  parents  lived  before  the  Fall,  taking  their  food  from 
never-failing  trees,  quenching  their  thirst  from  ample  and 
convenient  springs,  sleeping  in  the  balmy  air,  and  without 
thought  of  clothing,  even  of  aprons  of  fig-leaves.  The 
power  of  exerting  labor  they  would  of  course  possess,  as 
Adam  and  Eve  possessed  it  from  the  first;  but  of  that 
exertion  itself  and  of  the  toil  it  involves,  we  may  imagine 
them  as  ignorant  as  Adam  and  Eve  in  their  first  estate  are 
supposed  to  have  been.  On  that  island  there  would  clearly 
be  no  value.  Yet  if  valuable  articles  were  brought  there, 
would  they  necessarily  lose  their  value?  Could  they  be 


Chap.  XII.     VALUE   IN  EXCHANGE  AND  LABOK.  2-il 

parted  with  only  by  gift,  and  would  there  be  no  possibility 
of  exchanging  them  ? 

Imagine,  now,  a  ship  containing  such  merchandise  as 
would  tempt  the  fancy  of  a  primitive  people  to  come  in 
sight  of  the  island  and  cast  anchor.  Would  exchange 
between  the  ship's  people  and  the  islanders  be  impossible 
because  of  the  lack  on  the  part  of  the  islanders  of  anything 
having  value?  By  no  means.  If  nothing  else  would 
suffice,  the  offer  of  bright  cloths  and  looking-glasses  would 
surely  tempt  the  Eves,  if  it  did  not  the  Adams ;  and  though 
never  exerted  before,  the  islanders  would  exert  their  power 
of  labor  to  fill  the  ship  with  fruit  or  nuts  or  shells,  or 
whatever  else  of  the  natural  products  of  the  island  their 
exertion  could  procure,  or  to  pull  her  on  the  beach  so  that 
she  might  be  calked,  or  to  fill  and  roll  her  water-casks. 
There  was  nothing  of  value  in  the  island  before  the  ship 
came.  Yet  the  exchanges  that  would  thus  take  place  would 
be  the  giving  of  value  in  return  for  value ;  for  on  the  part 
of  the  islanders  value  that  did  not  exist  before  would  be 
brought  into  existence  by  the  conversion  of  their  labor 
power  through  exertion  into  wealth  or  services.  There 
would  thus  be  what  so  many  of  our  economists  say  is  im- 
possible, a  general  increase  of  values.  Even  if  we  suppose 
the  islanders  to  relapse  into  their  former  easy  way  of  living 
when  their  visitors  sailed  off,  there  would  still  remain  on 
the  island,  where  there  was  no  value  before,  some  things 
having  value,  and  this  value  would  attach  to  these  things 
until  they  were  destroyed  or  so  long  as  such  desire  as 
would  prompt  any  of  the  islanders  to  render  labor  in 
exchange  for  them  remained.  On  the  other  side,  the  value 
that  the  ship  would  carry  off  would  certainly  be  not  less 
than  the  value  she  contained  on  arrival,  and  in  all  proba- 
bility would  be  much  more. 

Now  the  way  thus  illustrated  is  the  way  in  which  the 
value  that  attaches  to  the  greater  number  of  valuable 


242  THE  NATUKE  OF  WEALTH.  Book  II. 

things  originates.  I  do  not  mean  merely  to  say  that  this 
was  the  way  of  the  first  appearance  of  value  among  men, 
but  that  it  is  the  way  in  which  the  value  that  attaches  to 
what  are  properly  articles  of  wealth  now  originates.  I  do 
not  mean  merely  to  say,  as  Adam  Smith  said,  that  it  was 
"  by  labor  that  all  the  wealth  of  the  world  ivas  originally 
purchased."  I  mean  to  say  that  it  is  by  labor  that  itis4iow 
purchased. 

Nothing,  indeed,  can  be  clearer  than  this.  Even  in  the 
richest  of  civilized  countries,  the  ultimate  purchasers  of 
the  greater  mass  of  valuable  things,  are  not  those  who  have 
in  store  valuable  things  that  they  can  give  in  exchange. 
The  great  body  of  the  people  in  any  civilized  society  con- 
sist of  what  we  call  the  working-class,  who  live  almost 
literally  from  hand  to  mouth,  and  who  have  in  their  pos- 
session at  any  one  time  little,  or  practically  nothing,  of 
value.  Yet  they  are  the  purchasers  of  the  great  body  of 
articles  of  value.  Where  does  the  value  which  they  thus 
exchange  for  value  which  is  already  in  concrete  form  come 
from "?  Does  it  not  come  from  the  conversion  of  their  labor 
power,  through  exertion,  into  value  ?  Is  not  the  exchange 
which  is  constantly  going-cm,  the  exchange  of  the  potenti- 
ality of  labor,  or  raw  labor  power  for  labor  power  that  by 
that  transfer  has  already  been  converted  into  value  ?  In 
common  phrase,  they  exchange  their  labor  for  commodities. 

How  does  this  fact— the  fact  that  the  great  body  of  val- 
uable things  pass  into  the  hands  of  those  who  have  no 
value  to  give  for  them  except  as  they  make  valuable  what 
before  had  no  value,  and  are  consumed,  by  being  eaten, 
drunk,  burned  up  or  worn  out,  by  them— consort  with  the 
theory  that  value  is  a  relation  of  exchangeability  between 
valuable  things,  and  that  there  can  be  no  general  increase 
or  decrease  of  values  ?  Does  it  not  utterly  invalidate  the 
theory?  Must  there  not  be  a  constant  increase  of  value 
to  make  up  for  the  constant  destruction  of  value,  and  in 


Chap.  XII.     VALUE  IN  EXCHANGE  AND  LABOR.  243 

spite  of  it,  to  permit  such  growth  of  aggregate  values  as 
we  see  going  on  in  progressive  countries  ?  And  in  times 
when  the  ability  to  convert  labor  into  values  is  checked  by 
what  we  call  "want  of  employment"  and  great  numbers 
of  workers  are  idle,  is  there  not  a  clear  lessening  of  the 
sum  of  values,  a  general  decrease  in  values,  as  compared 
with  the  times  when  there  is  what  we  call  "  abundance  of 
employment/7  and  the  great  majority  of  them  are  at  work, 
turning  labor  power  through  exertion  into  value  ? 

The  truth  is  that  current  theories  of  value  have  resulted 
from  the  efforts  of  intelligent  men  to  mold  into  a  sem- 
blance of  coherency  teachings  built  upon  fundamental 
incoherencies.  Let  me  point  out  what  gives  them  plausi- 
bility, the  fallacy  involved  in  the  inclusion  of  labor  as  an 
"  other  valuable  thing,"  while  the  real  stress  of  the  exami- 
nation is  laid  upon  the  relative  values  of  such  things  as 
gold,  wheat,  hardware  and  cotton  goods— things  that  are 
products  of  labor.  It  is  a  fallacy  which  our  habit  of 
speaking  of  the  buying  and  selling  and  exchanging  of 
labor,  and  our  habit  of  thinking  of  the  value  of  labor  as 
we  think  of  the  value  of  gold  or  wheat  or  hardware  or 
cotton  goods,  conceals  from  attention,  but  which  is  in 
reality  a  fallacy  of  the  kind  named  by  the  old  logicians 
"  the  fallacy  of  undistributed  middle." 

Here  we  come  to  another  instance  of  the  care  needed  in 
political  economy  in  the  use  of  words.  By  the  word 
"labor"  we  sometimes  mean  the  power  of  laboring— as 
when  we  speak  of  the  exertion  of  labor,  or  of  labor  being 
employed,  or  of  labor  being  idle  or  wasting.  Sometimes 
we  mean  the  act  of  laboring— as  when  we  speak  of  the 
irksomeness  or  toil  of  labor,  or  of  the  results  or  products 
of  labor.  Sometimes  we  mean  the  results  of  laboring— 
as  is  the  case  in  most  or  all  of  the  instances  in  which 
we  speak  of  buying,  selling  or  exchanging  labor— the 
real  thing  bought,  sold  or  exchanged  being  the  results  of 


244  THE  NATURE  OF  WEALTH.  Book  II. 

laboring,  that  is  to  say,  wealth  or  services.  And  sometimes, 
again,  we  mean  the  persons  who  do  labor  or  the  persons 
who  have  the  power  and  the  willingness  to  labor. 

It  is  clear  that  labor  in  the  first-mentioned  sense  of  the 
|  word,  that  of  the  power  or  ability  of  laboring,  is  not  an 
!  exchangeable  thing  and  cannot  come  into  any  category  of 
values.  It  resides  in  the  individual  body  and  cannot  be 
taken  out  of  that  body  and  transferred  to  another,  any 
more  than  can  sight  or  hearing,  or  wisdom  or  courage  or 
skill.  I  may  avail  myself  of  another's  skill,  courage  or 
wisdom,  of  his  hearing  or  of  his  sight,  by  getting  him  to 
exert  them  for  my  benefit.  And  so  I  may  avail  myself  of 
another's  ability  to  labor  by  getting  him  to  do  me  services, 
or  to  produce  things  which  I  am  to  own.  But  the  power 
of  laboring  he  cannot  give,  nor  I  receive.  While  there 
are  results  of  its  expenditure  that  may  be  transferred, 
the  power  itself  is  intransferable,  and  therefore  unex- 
changeable. 

Now  the  failure  to  keep  in  mind  these  different  senses 
of  the  word  labor,  the  failure  to  distribute  the  term,  as 
the  logicians  would  say,  operates  to  shut  off  inquiry  as  to 
whether  the  cause  of  value  is  not  to  be  found  in  labor. 
For  since  in  some  senses  labor  is  thought  of  as  having 
value  in  exchange,  the  term,  without  distinction  as  to  its 
various  senses,  is  apt  to  pass  in  our  minds  into  the  category 
of  exchangeable  things,  with  gold  or  wheat  or  hardware  or 
cotton  goods,  or  "  other  products  of  labor  •  "  and  thus  the 
question  is  unconsciously  begged. 

But,  when  we  realize  that,  in  whatever  other  sense  of  the 
word  we  may  say  that  labor  is  a  valuable  thing,  we  must 
carefully  exclude  the  sense  of  labor  power,  or  ability  to 
labor,  a  confusion  is  cleared  up  which  has  made  the  search 
for  the  true  nature  of  what  we  call  value  in  exchange  a 
fruitless  "  swinging  round  a  circle."  For  since  value  does 
not  exist  in  labor  power,  but  does  appear  where  that  power 


TV 


.  VALUE  IN  EXCHANGE  AND  LABOR.    245 

takes  tangible^  f orm  through  exertion,  the  fundamental 
relation  of  value  must  be  a  relation  to  exertion. 

But  a  relation  to  exertion  in  what  sense?  A  rela- 
tion to  exertion  positively,  or  a  relation  to  exertion  nega- 
tively ? 

I  exchange  gold  for  silver,  let  us  say.  In  this  I  give 
something  positively  and  receive  something  positively.  I 
get  rid  of  gold  and  acquire  silver.  The  other  party  to  the 
exchange  gets  rid  of  silver  and  acquires  gold.  But  when 
I  exchange  gold  for  exertion  or  toil,  do  I  get  rid  of  gold  s 
and  acquire  toil,  and  does  he  get  rid  of  toil  and  acquire  l 
gold J?  Clearly  not.  No  one  wants  exertion  or  toil ;  all  of  / 
us  want  to  get  rid  of  it.  It  is  not  exertion  in  a  positive 
sense  which  is  t^e  object  of  exchange,  but  exertion  in  a 
negative  sense  ,\  not  exertion  given  or  imposed,  but  exer- 
tion avoided  or  saved ;  or,  to  use  the  algebraic  form,  the 
relation  of  the  quality  of  value  is  not  to  plus-exertion,  but 
to  minus-exertion.  Value,  in  short,  is  equivalent  to  the 
saving  of  exertion  or  toil,  and  the  value  of  anything  is  the 
amount  oFtoiT"whlcE  the  possession  of  that  thing  will  save 
the  possessor,  or  enable  him,  to  use  Adam  Smith's  phrase, 
*rto  impose  upon  other  people,"  through  exchange.  Thus, 
it  is  not  exchangeability  that  gives  value ;  but  value  that 
gives  exchangeability.  For  since  it  is  only  by  exertion 
that  human  desires  can  be  satisfied  (those  cravings  or  im- 
pulses that  can  be  satisfied  without  exertion  not  rising  to 
the  point  of  desire)  whatever  will  dispense  its  owner  from 
the  toil  and  trouble  of  exertion  in  the  satisfaction  of  desire 
in  that  acquires  exchangeability. 

Let  me  put  the  proposition  in  another  form : 

The  current  theory  is  that  it  is  when  and  because  a  thing 
becomes  exchangeable  that  it  becomes  valuable.  My  con- 
tention is  that  the  truth  is  just  the  reverse  of  this,  and 
it  is  when  and  because  a  thing  becomes  valuable  that  it 
becomes  exchangeable. 


246  THE  NATURE  OF  WEALTH.  Book  II. 

It  is  not  the  toil  and  trouble  which  a  thing  Ms  cost  that 
gives  it  value.  It  may  have  cost  much  and  yet  be  worth 
nothing.  It  may  have  cost  nothing  and  yet  be  worth 
much.  It  is  the  toil  and  trouble  that  others  arejHQw^ 
willing,  directly  or  indirectly,  to  relieve  the  owner  of,  in 
exchange  for  the  thing,  by  giving  him  the  advantage  of 
the  results  of  exertion,  while  dispensing  him  of  the  toil 
and  trouble  that  are  the  necessary  accompaniments  of 
exertion.  Whether  I  have  obtained  a  diamond,  for 

r—  ^  ^f  ' 

instance,  by  years  of  hard  toil  or  by  merely  stooping  to 

pick  it  up— a  movement  which  can  hardly  be  called  an 
exertion,  since  it  is  in  itself  but  a  gratification  of  curiosity 
which  does  not  involve  irksomeness— has  nothing  what- 
ever to  do  with  its  value.  That  depends  upon  the  amount 
\  of  toil  and  trouble  that  others  will  undergo  for  my  benefit 
in  exchange  for  it;  or  what  amounts  to  the  same  thing, 
which  they  will  dispense  me  of  in  the  satisfaction  of  my 
desire,  by  giving  me  things  in  exchange,  for  which  others 
will  undergo  toil  and  trouble. 

That  which  may  be  had  without  the  toil  and  trouble  of 
exertion  has  no  value.  That  for  which  the  desire  to  pos- 
sess is  not  strong  enough  to  prompt  to  the  toil  and  trouble 
of  exertion  has  likewise  no  value.  But  everything  having 
value,  has  that  value  only  when,  where  and  to  the  degree 
that  its  possession  will,  without  exertion  on  the  part  of  its 
possessor,  satisfy  through  exchange  a  desire  that  prompts 
to  exertion. 

In  other  words,  the  value  of  a  thing  is  the  amount  of 
laboring  or  work  that  its  possession  will  save  to  the 
possessor. 

Desire  itself,  which  is  the  prompter  to  exertion,  cannot 
be  measured,  as  the  most  recent  school  of  pseudo-econo- 
mists attempt  vainly  to  measure  it.  It  is  a  quality  or 
affection  of  the  will  or  individual  Ego,  which,  being  in  its 
nature  subjective,  can  have  no  objective  measurement 


Cliap.XlI.     VALUE  IN  EXCHANGE  AND  LABOE.  247 

until  it  passes  through  action  into  the  field  of  objective 
existence.  Even  in  the  individual  it  is  not  a  fixed  quality 
or  affection,  but  resembles  more  the  illumination  produced 
by  a  movable  search-light,  which,  as  it  brings  one  object 
in  the  landscape  into  focus,  throws  another  into  shade. 
All  that  we  can  say  of  it  is  that  it  has  a  certain  scale  or 
order  of  appearance,  so  that  when  the  more  primitive 
desires  that  we  call  "  wants  "  or  "  needs "  slumber  in  sat- 
isfaction, other  desires  appear  j  or  as  they  are  enkindled 
again,  these  others  disappear. 

But  desire  impels  to  action,  as  what  we  call  energy  or 
force  impels  to  movement.  And  while  we  can  no  more 
measure  desire  in  itself  than  we  can  measure  force  in  itself, 
we  can  measure  it  in  the  same  way  that  we  measure  energy 
or  force— by  the  resistance  it  will  overcome.  Now,  while 
the  resistance  to  movement  is  inertia— probably  resolvable 
into  gravitation  and  chemical  affinities  j  so  the  resistance 
to  the  gratification  of  desire  is  the  toil  and  trouble  of  exer- 
tion. It  is  this  that  is  expressed  by  and  measured  in 
values. 

To  repeat :  Since  the  desire  for  material  satisfactions  is 
universal  among  men,  and  the  only  way  in  which  these 
satisfactions  can  be  obtained  from  Nature  is  by  exertion, 
which  men  always  seek  to  avoid,  whatever  will  satisfy  de- 
sire without  calling  for  exertion  is  for  that  reason  desired 
of  itself,  not  for  its  own  uses,  but  because  it  affords  the 
means  of  gratifying  other  desires,  and  thus  becomes 
exchangeable  whenever  the  existence  of  others  than  its 
owner  makes  exchange  possible.  Normally,  at  least,  value 
and  exchangeability  are  thus  always  associated  and  seem- 
ingly identical.  But  in  the  causal  relationship,  value 
comes  first.  That  is  to  say,  it  is  not  true,  as  economists 
since  the  time  of  Adam  Smith  have  erroneously  taught, 
that  a  thing  is  valuable  because  it  is  exchangeable.  On 
the  contrary,  it  is  exchangeable  because  it  is  valuable.  Ex- 


248  THE  NATURE  OF   WEALTH.  Book  II. 

change  is  in  fact  the  mutual  transfer  of  value.  Of  all 
other  qualities  of  things,  value  is  the  only  quality  of  which 
exchange  takes  note. 

A  little  use  of  imaginative  experiment  will  make  it  clear 
that  what  we  call  value  in  exchange  is  in  reality  not  depen- 
dent on  exchangeability,  but  may  exist  when  exchange  is 
impossible. 

A  Robinson  Crusoe  during  his  period  of  isolation  could 
make  no  exchanges,  for  there  was  no  one  with  whom  he 
could  exchange,  and  it  was  only  the  hope  of  being  some- 
time discovered  and  relieved  that  could  have  prompted  him 
to  take  his  pieces  of  eight  ashore.  Yet,  as  this  hope  faded 
it  is  not  true  that  his  estimate  of  the  different  things  he 
possessed  would  be  entirely  based  on  their  utility  to  him, 
and  that  he  would  have  no  sense  of  the  relation  which  we 
call  value  in  exchange.  Even  if  the  hope  of  being  some- 
time relieved  had  entirely  disappeared  from  his  thought, 
something  essentially  the  same  as  value  in  exchange  would 
be  brought  out  in  his  mind  by  any  question  of  getting  or 
saving  one  of  two  or  more  things.  Of  several  things  to 
him  equally  useful,  which  he  might  find  in  the  wreck  of  his 
ship  or  on  the  shore  line  under  conditions  which  would 
enable  him  to  secure  but  one  j  or  of  several  equally  useful 
to  him,  which  were  threatened  by  a  deluge  of  rain  or  an 
incursion  of  savages,  it  is  evident  that  he  would  "  set  the 
most  store  by"  that  which  would  represent  to  him  the 
greatest  effort  to  replace.  Thus,  in  a  tropical  island  his 
valuation  of  a  quantity  of  flour,  which  he  could  replace  only 
by  cultivating,  gathering  and  pounding  the  grain,  would 
be  much  greater  than  that  of  an  equal  quantity  of  bananas, 
which  he  might  replace  at  the  cost  of  plucking  and  carry, 
ing  them ;  but  on  a  more  northern  island  this  estimate  of 
relative  value  might  be  reversed. 

And  so  all  things  which  to  get  or  retain  would  require 
of  him  toil  would  come  to  assume  in  his  mind  a  relation 


Chap.  XII.     VALUE  IN  EXCHANGE  AND  LABOK.  249 

of  value  distinct  from  and  independent  of  their  usefulness, 
a  relation  based  on  the  greater  or  less  degree  of  exertion 
that  their  possession  would  enable  him  to  avoid  in  the 
gratification  of  his  desires. 

It  is  this  relation  which  lies  at  the  bottom  of  value  in 
the  economic  sense,  or  value  in  exchange.  In  the  last 
analysis  value  is  but  an  expression  of  exertion  avoided. 

To  sum  up : 

Value  in  exchange,  or  value  in  the  economic  sense,  is 
worth  in  exertion.  It  is  a  quality  attaching  to  the  owner- 
ship of  things,  of  dispensing  with  the  exertion  necessary 
to  secure  the  satisfaction  of  desire,  by  inducing  others  to 
take  it.  Things  are  valuable  in  proportion  to  the  amount 
of  exertion  which  they  will  command  in  exchange,  and 
will  exchange  with  each  other  in  that  proportion. 

The  value  of  a  thing  in  any  given  time  and  place  is  the 
largest  amount  of  exertion  that  any  one  will  render  in 
exchange  for  it.  But  as  men  always  seek  to  gratify  their 
desires  with  the  least  exertion,  this  is  the  lowest  amount 
for  which  a  similar  thing  can  otherwise  be  obtained. 

But  while  value  means  always  the  same  quality— that 
of  dispensing  with  exertion  in  the  satisfaction  of  desire 
—yet  there  are  various  sources  from  which  this  quality 
originates.  These  may  be  broadly  divided  into  two— that 
which  originates  in  the  toil  and  trouble  involved  in  pro- 
duction, and  that  which  originates  in  obligation  to  undergo 
toil  and  trouble  for  the  benefit  of  another.  The  failure  to 
note  this  difference  in  the  sources  of  value  is  the  cause  of 
great  perplexity. 


CHAPTER  XIII. 
THE  DENOMINATOR  OF  VALUE. 

SHOWING  WHAT  VALUE  IS,   AND  ITS  RELATIONS. 

What  value  is — The  test  of  real  value — Value  related  only  to  human 
desire — This  perception  at  the  bottom  of  the  Austrian  school — 
But  its  measure  must  be  objective— How  cost  of  production  acts 
as  a  measure  of  value — Desire  for  similar  things  and  for  essential 
things— Application  of  this  principle— Its  relation  to  land  values. 

VALUE  in  the  economic  sense  or  value  in  exchange  is, 
as  we  have  seen,  worth  in  exchange.  It  is  a  quality 
attaching  to  the  ownership  of  things,  of  dispensing  with 
the  exertion  necessary  to  secure  the  satisfaction  of  desire, 
by  inducing  others  to  take  it  in  return  for  them.  Things 
are  valuable  in  proportion  to  the  amount  of  exertion  that 
they  will  thus  command,  and  will  exchange  with  each  other 
in  that  proportion. 

The  value  of  a  thing  in  any  time  and  place  is  thus  the 
largest  amount  of  exertion  that  any  one  will  render  in 
exchange  for  it.  And  since  men  always  seek  to  gratify 
their  desires  with  the  least  exertion  this  is,  or  always  tends 
to  be,  the  lowest  amount  for  which  such  a  thing  can  other- 
wise be  obtained. 

This  of  course  is  not  to  say  that  whatever  anything  may 
exchange  for  is  its  value.  In  individual  and  especially  in 
unaccustomed  transactions  the  point  at  which  any  par- 
ticular exchange  takes  place  may  considerably  vary.  But 

250 


Chap.  XIII.        THE  DENOMINATOR  OF  VALUE.  251 

that  our  idea  of  value  assumes  a  normal  point,  and  what 
this  point  really  is,  may  be  seen  in  common  speech.  Thus 
we  frequently  say  of  the  exchange  of  a  certain  thing  that 
it  brought  less  than  its  value,  or  that  it  brought  more  than 
its  value.  Now  in  this,  which  we  refer  to  as  a  real  or  true 
value,  differing  from  the  assumption  of  value  in  the  par- 
ticular exchange,  we  mean  something  more  definite  than 
customary  or  habitual  value,  for  this,  as  in  our  times  we 
know,  is  subject  in  regard  to  particular  things  to  consider- 
able and  not  infrequent  changes.  What  we  really  mean 
by  this  real  value,  and  what  is  its  true  test,  we  show  in  the 
way  we  attempt  to  prove  that  a  thing  was  exchanged  at 
more  or  less  than  its  value.  We  say  that  a  thing  was  ex- 
changed at  less  than  its  value  because  some  one  else  would 
have  given  more  for  it.  Or  that  a  thing  was  exchanged  at 
more  than  its  value  because  some  one  else  would  have  given 
the  same  thing  for  a  less  return.  And  so  what  we  deem 
the  point  of  real  value,  or  actual  equivalence,  we  speak  of 
as  market  value,  from  the  old  idea  of  the 'market  or  meet- 
ing place  of  those  who  wish  to  make  exchanges,  where 
competition  or  the  higgling  of  the  market  brings  out  the 
highest  bidding  or  the  lowest  offering  in  transactions  of 
exchange.  And  when  we  wish  to  ascertain  the  exact  value 
of  a  thing  we  offer  it  at  auction  or  in  some  other  way  sub- 
ject it  to  competitive  offers. 

Thus  I  am  justified  in  saying  that  the  value  of  a  thing 
in  any  time  and  place  is  the  largest  amount  of  exertion 
that  any  one  will  render  in  exchange  for  it ;  or  to  make 
the  estimate  from  the  other  side,  that  it  is  the  smallest 
amount  of  exertion  for  which  any  one  will  part  with  it  in 
exchange. 

Value  is  thus  an  expression  which,  when  used  in  its 
proper  economic  sense  of  value  in  exchange,  has  no  direct 
relation  to  any  intrinsic  quality  of  external  things,  but 
only  to  man's  desires.  Its  essential  element  is  subjective, 


252  THE  NATURE   OF  WEALTH.  Book  II. 

not  objective ;  that  is  to  say,  lying  in  the  mind  or  will  of 
man,  and  not  lying  in  the  nature  of  things  external  to  the 
human  will  or  mind.  There  is  no  material  test  for  value. 
Whether  a  thing  is  valuable  or  not  valuable,  or  what  may 
be  the  degree  of  its  value,  we  cannot  really  tell  by  its  size 
or  shape  or  color  or  smell,  or  any  other  material  quality, 
except  so  far  as  such  investigations  may  enable  us  to  infer 
how  other  men  may  regard  them.  For  the  point  of  equiva- 
lence or  equation  that  we  express  or  assume  when  we  speak 
of  the  value  of  a  thing  is  a  point  where  the  desire  to  obtain 
in  one  mind  so  counterbalances  in  its  effect  on  action  the 
desire  to  retain  in  another  mind  that  the  thing  itself  may 
pass  in  exchange  from  the  possession  of  one  man  to  the 
possession  of  another  with  mutual  willingness. 

Now  this  fact  that  the  perception  of  value  springs  from 
a  feeling  of  man,  and  has  not  at  bottom  any  relation  to  the 
external  world— a  fact  that  has  been  much  ignored  in  the 
teachings  and  expositions  of  accepted  economists— is  what 
lies  at  the  bottom  of  the  grotesque  confusions  which,  under 
the  name  of  the  Austrian  school  of  political  economy,  have 
within  recent  years  so  easily  captured  the  teachings  of 
pretty  much  all  the  universities  and  colleges  in  the  English- 
speaking  world. 

Vaguely  feeling  that  there  was  something  wrong  in  the 
accepted  theory  of  value,  they  have  taken  the  truth  that 
value  is  not  a  quality  of  things  but  an  affection  of  the 
human  mind  towards  things,  and  attempted  at  the  risk  of 
fatal  consequences  to  the  ancient  landmarks  of  English 
speech  to  account  for,  classify  and  measure  value  through 
what  is  and  ever  must  remain  the  subjective— that  is  to 
say,  pertaining  to  the  individual  Ego. 

The  fault  of  all  this  is  that  it  begins  at  the  wrong  end. 
What  is  subjective  is  in  itself  incommunicable.  A  feel- 
ing so  long  as  it  remains  merely  a  feeling  can  be  known 
only  to  and  can  be  measured  only  by  him  who  feels  it. 


Chap.  XIII.        THE  DENOMINATOR  OF  VALUE.  253 

It  must  come  out  in  some  way  into  the  objective  through 
action  before  any  one  else  can  appreciate  or  in  any  way 
measure  it.  Even  if  we  ourselves  may  measure  the  strength 
of  a  desire  while  it  is  as  yet  merely  felt,  we  can  make  no 
one  else  adequately  understand  it  until  it  shows  itself  in 
action. 

Value  has  of  course  its  origin  in  the  feeling  of  desire. 
But  the  only  measure  of  desire  it  can  afford  is  akin  to  the 
rough  and  ready  way  of  measuring  sorrow  which  was  pro- 
posed at  a  funeral  by  the  man  who  said :  "  I  am  sorry  for 
the  widow  to  the  amount  of  five  dollars.  How  much  are 
the  rest  of  you  sorry  ? "  Now,  what  value  determines  is 
not  how  much  a  thing  is  desired,  but  how  much  any  one  is 
willing  to  give  for  it ;  not  desire  in  itself,  but  what  the 
elder  economists  have  called  effective  demand— that  is  to 
say,  the  desire  to  possess,  accompanied  by  the  ability  and 
willingness  to  give  in  return. 

Thus  it  is  that  there  is  no  measure  of  value  among  men 
save  competition  or  the  higgling  of  the  market,  a  matter 
that  might  be  worth  the  consideration  of  those  amiable 
reformers  who  so  lightly  propose  to  abolish  competition. 

It  is  never  the  amount  of  labor  that  has  been  exerted  in 
bringing  a  thing  into  being  that  determines  its  value,  but 
always  the  amount  of  labor  that  will  be  rendered  in  ex- 
change for  it.  Nevertheless,  we  properly  speak  of  the  value 
of  certain  things  as  being  determined  by  the  cost  of  pro- 
duction. But  the  cost  of  production  that  we  thus  refer  to 
is  not  the  expenditure  of  labor  that  has  taken  place  in 
producing  the  identical  thing,  but  the  expenditure  of  labor 
that  would  now  be  required  to  produce  a  similar  thing— 
not  what  the  thing  itself  has  cost,  but  what  such  a  thing 
would  now  cost. 

The  desire  to  obtain,  which  renders  men  willing  to 
'undergo  exertion,  is,  save  in  rare  cases,  not  the  desire  for 
an  identical  thing,  but  the  desire  for  a  similar  thing.  Thus, 


254  THE  NATURE  OF   WEALTH.  Book  II. 

a  desire  for  wheat  is  not  a  desire  for  certain  particular 
grains  of  wheat ;  but  a  desire  for  wheat  generally,  or  for 
wheat  of  a  certain  kind.  So  a  desire  for  coats,  or  knives, 
or  drinking-glasses  or  so  on,  is,  save  in  very  rare  cases,  not 
a  desire  for  particular,  identical  things,  but  a  desire  for 
similar  things.  Now,  the  value  of  a  thing  in  any  given 
time  and  place  is  the  largest  amount  of  labor  that  any  one 
will  render  (or  cause  others  to  render)  in  exchange  for  it. 
But  as  men  always  seek  to  gratify  their  desires  with  the 
least  exertion,  this  highest  amount  of  labor  which  any  one 
will  give  for  a  similar  thing  in  any  time  and  place,  tends 
always  to  be  the  lowest  amount  for  which  such  a  thing 
can  in  any  other  way  be  obtained. 

Thus  the  point  of  equation  between  desire  and  satisfac- 
tion, or  as  we  usually  say,  between  demand  and  supply, 
tends  in  a  case  of  things  that  can  be  produced  by  labor  to 
the  cost  of  production— that  is  to  say,  not  what  the  pro- 
duction of  the  thing  has  cost,  but  the  present  cost  of 
producing  a  similar  thing.  Desire  remaining,  whatever 
increases  the  amount  of  labor  that  must  be  expended  to 
obtain  similar  tilings  by  making  them  will  thus  tend  to 
increase  the  value  of  existing  things ;  and  whatever  tends 
to  decrease  the  cost  of  obtaining  similar  things  by  making 
them  will  tend  to  decrease  the  value  of  existing  things. 

But  there  are  some  cases  in  which  the  desire  for  a 
product  of  labor  is  not  a  desire  for  a  similar  thing,  but 
for  a  particular  and  identical  thing.  Thus,  when  that 
great  genius  and  great  toady,  Sir  "Walter  Scott,  carried 
off  a  wine-glass  from  which  George  IV.  had  drunk,  it  was 
to  satisfy  a  desire  not  for  a  similar  glass,  but  for  that 
particular  glass,  which  had  been  honored  by  the  lips  of 
royalty.  Where  such  a  desire  is  felt  by  only  one  person 
or  one  economic  unit,  as  where  I  or  my  family  may  value 
a  chair  or  table  or  book  which  once  belonged  to  some  one 
we  loved,  our  valuation  is  analogous  to  value  in  use,  and 


Chap.  XIII.        THE  DENOMINATOR  OF  VALUE.  255 

does  not  affect  its  economic  or  exchange  value,  except 
perhaps  as  it  might  make  us  loath  to  part  with  it  at  its 
true  exchange  value.  But  where  more  than  one  person 
or  unit  has  this  desire,  which  is  the  case  where  the  posses- 
sion of  a  particular  article  comes  to  gratify  ostentation,  it 
acquires  an  exchange  value  which  is  not  limited  by  the 
cost  of  producing  a  similar  thing.  Thus,  an  original 
picture  of  a  dead  master,  or  an  original  copy  of  an  old 
edition  of  a  book,  which  identically  cannot  now  be  produced 
by  any  amount  of  exertion,  may  have  a  value  not  limited 
by  the  cost  of  production,  and  this  may  rise  to  any  height 
to  which  sentiment  or  ostentation  may  carry  desire. 

The  cases  I  have  here  taken  to  illustrate  the  principle 
have  but  small  practical  application,  though  they  are  con- 
tinually called  to  attention,  and  any  theory  of  value  must 
include  them.  But  the  principle  itself  has  the  widest  and 
most  important  applications,  which  steadily  increase  in 
importance  with  the  growth  of  civilization.  The  value  that 
attaches  to  land  with  the  growth  of  civilization  is  an 
example  of  the  same  principle  which  governs  in  the  case 
of  a  picture  by  a  Raphael  or  Rubens,  or  an  Elgin  marble. 
Land,  which  in  the  economic  sense  includes  all  the  natural 
opportunities  of  life,  has  no  cost  of  production.  It  was 
here  before  man  came,  and  will  be  here,  so  far  as  we  can 
see,  after  he  has  gone.  It  is  not  produced.  It  was  created. 

And  it  was  created  and  still  exists  in  such  abundance  as 
even  now  far  to  exceed  the  disposition  and  power  of  man- 
kind to  use  it.  Land  as  land,  or  land  generally— the 
natural  element  necessary  to  human  life  and  production- 
has  no  more  value  than  air  as  air.  But  land  in  special, 
that  is,  land  of  a  particular  kind  or  in  a  particular  locality, 
may  have  a  value  such  as  that  which  may  attach  to  a  par- 
ticular wine-glass  or  a  particular  picture  or  statue ;  a  value 
which  unchecked  by  the  possibility  of  production  has  no 
limit  except  the  strength  of  the  desire  to  possess  it. 


256  THE  NATURE  OF  WEALTH.  Book  II. 

This  attaching  of  value  to  land  in  special— that  is  to  say, 
land  in  particular  localities  with  respect  to  population— 
is  not  merely  a  most  striking  feature  in  the  progress  of 
modern  civilization,  but  it  is,  as  I  shall  hereafter  show,  a 
consequence  of  civilization,  lying  entirely  within  the  natu- 
ral order,  and  furnishing  perhaps  the  most  conclusive 
proof  that  the  intent  of  that  order  is  the  equality  of  men. 
If  left  by  just  municipal  laws  to  its  natural  development, 
the  strength  of  the  desire  to  use  particular  land  can  never 
become  the  desire  to  use  land  generally,  and  can  never  rise 
to  the  point  of  lowering  wages  by  compelling  workers  to 
give  for  the  use  of  land  any  part  of  what  is  the  natural 
and  just  earnings  of  their  labor.  But  where  land  is  monop- 
olized and  the  resort  of  population  to  unmonopolized 
land  is  shut  out  either  by  legal  restriction  or  social  con- 
ditions, then  the  desire  to  use  particular  land  may  be  based 
upon  the  desire  to  use  land  generally,  or  land  the  natural 
element  j  and  its  strength,  measured  in  the  only  way  in 
which  we  can  measure  the  strength  of  a  desire,  the  willing- 
ness to  undergo  toil  and  trouble  for  its  gratification,  may 
become  when  pushed  to  full  expression,  nothing  less  than 
the  strength  of  the  desire  for  life  itself,  for  land  is  the 
indispensable  prerequisite  to  life,  and  "  all  that  a  man  hath 
will  he  give  for  his  life." 

But  in  every  case  the  value  of  land,  consisting  in  the 
amount  of  exertion  that  can  be  commanded  from  those 
who  desire  to  use  it  by  those  who  have  the  power  of  giving 
or  refusing  consent  to  its  use,  is  in  the  nature  of  an  obli- 
gation to  render  service  rather  than  in  that  of  an  exchange 
/  of  service. 


CHAPTER  XIV. 
THE  TWO  SOURCES   OF  VALUE. 

SHOWING  THAT  THERE  IS  A  VALUE  FROM  PRODUCTION  AND 
ALSO  A  VALUE  FROM  OBLIGATION. 

Value  does  not  involve  increase  of  wealth— Value  of  obligation— Of 
enslavement— Economic  definition  of  wealth  impossible  without 
recognition  of  this  difference  in  value — Smith's  confusion  and 
results— Necessity  of  the  distinction— Value  from  production  and 
value  from  obligation — Either  gives  the  essential  quality  of  com- 
manding exertion — The  obligation  of  debt — Other  obligations — 
Land  values  most  important  of  all  forms  of  value  from  obligation 
—Property  in  land  equivalent  to  property  in  men— Common  mean- 
ing of  value  in  exchange— Real  relation  with  exertion— Ultimate 
exchangeability  is  for  labor — Adam  Smith  right — Light  thrown 
by  this  theory  of  value. 

WE  now  come  to  a  point  of  much  importance.    For  it 
is  to  the  failure  to  note  what  I  wish  in  this  chapter 
to  point  out  that  the  confusions  that  have  so  perplexed 
the  terms  value  and  wealth  in  the  study  of   political 
economy  have  arisen. 

It  is  usually,  if  not  indeed  invariably  assumed  in  all 
standard  economic  works  that  the  conversion  of  labor 
power  through  exertion  into  services  or  wealth  is  the  only 
way  in  which  value  originates. 

Yet  what  we  have  already  seen  is  enough  to  show  us 
that  this  cannot  be  so. 

It  is  not  the  exertion  that  a  thing  has  cost,  in  past  time, 
that  gives  it  value,  but  the  exertion  that  its  possession  will 

257 


258  THE  NATURE  OF  WEALTH.  Book  11. 

in  future  time  dispense  with,  for  even  the  immediate  is  in 
strictness  future.  Thus  value  may  be  created  by  mere 
agreement  to  render  exertion,  or  by  the  imposition  of  such 
obstacles  to  the  satisfaction  of  desire  as  will  necessitate  a 
greater  exertion  for  the  attainment  of  the  satisfaction.  In 
the  same  way,  the  value  of  some  things  may  be  increased, 
or  sometime  perhaps  produced,  without  the  production  of 
real  wealth ;  or  even  by  the  destruction  of  real  wealth. 

For  instance:  I  with  another  may  agree  to  exchange, 
but  consummate  in  the  present  but  one  side  of  the  full 
exchange,  substituting  for  the  other  side  an  agreement  or 
obligation  to  complete  it  in  the  future.  That  is  to  say,  I 
may  give  or  receive  things  having  present  value  in  return 
for  an  obligation  to  render  labor  or  the  results  or  repre- 
sentatives of  labor  at  some  definite  or  indefinite  future 
time.  Or,  both  of  us  may  exchange  similar  obligations. 
The  obligations  thus  created  may,  and  frequently  do,  at 
once  assume  value  and  become  exchangeable  for  exertion 
or  the  results  of  exertion.  Or,  a  government  or  joint-stock 
company  may  issue  obligations  of  the  same  kind,  in  the 
form  of  bonds  or  stock,  which  may  at  once  assume  a  value 
dependent  as  in  the  case  of  an  individual  upon  the  strength 
of  the  belief  that  the  obligations  will  be  faithfully  re- 
deemed, irrespective  of  any  counter  payment  or  obligation. 

There  is  in  all  this  no  increase  of  wealth ;  but  there  is  a 
creation  of  value— a  value  arising  out  of  obligation  and 
dependent  entirely  upon  expectation,  but  still  a  value— an 
exchangeable  quantity,  the  possession  of  which  could  com- 
mand through  exchange  other  valuable  things. 

Or,  again :  Suppose  the  discoverers  of  the  Isle  of  Eden, 
we  have  imagined,  to  have  been  of  the  same  kidney  as  the 
Spanish  discoverers  of  America,  and  instead  of  tempting 
the  islanders  to  work  for  them  by  exciting  their  desire  for 
new  satisfactions,  had  compelled  them  to  work  by  whip- 
ping, or  killing  them  if  they  refused.  The  discoverers 


Chap.  XIV.       THE  TWO   SOUECES  OF  VALUE.  259 

might  thus  have  carried  off,  as  the  Spanish  conquistadors 
carried  off,  what  readily,  exchanging  for  exertion  in  other 
parts  of  the  world,  would  there  have  great  value— not 
merely  precious  metals  or  stones,  woods  or  spices— but 
even  the  natives  themselves.  For  carried  to  any  country 
where  the  power  to  compel  them  to  work  was  by  municipal 
law  transferable,  these  human  beings  would  have  value, 
just  as  the  ability  to  compel  their  service  in  their  native 
island  would  have  value. 

Now  in  Individual  Economy,  which  takes  cognizance 
only  of  the  relations  of  the  individual  to  other  individuals, 
there  is  no  difference  between  these  two  kinds  of  value. 
Whether  an  individual  has  the  power  of  commanding 
exertion  from  others  because  he  has  added  to  the  general 
stock,  or  simply  because  he  holds  the  power  of  demanding 
exertion  from  others  makes  no  difference  to  him  or  to  them.  . 
In  either  case  he  gets  and  they  give.  \/ 

But  in  political  economy,  which  is  the  economy  of  the 
Society  or  the  aggregate,  there  is  a  great  difference.  Value 
of  the  one  kind — the  value  which  constitutes  an  addition 
to  the  common  stock— involves  an  addition  to  the  wealth 
of  the  community  or  aggregate,  and  thus  is  wealth  in  the 
politico-economic  sense.  Value  of  the  other  kind— the 
value  which  consists  merely  of  the  power  of  one  individual  ,-;O 
to  demand  exertion  from  another  individual— adds  nothing 
to  the  common  stock,  all  it  effects  is  a  new  distribution 
of  what  already  exists  in  the  common  stock,  and  in  the 
politico-economic  sense,  is  not  wealth  at  all. 

In  the  development  of  political  economy  from  Adam 
Smith  these  two  and  totally  different  kinds  of  values  have 
been  confused  in  one  word.  Smith  started  in  by  recog- 
nizing as  value  that  which  added  to  wealth,  but  he  after- 
wards, and  with  seeming  carelessness  included  as  value  that 
which  adds  to  the  wealth  of  the  individual,  but  adds 
nothing  whatever  to  the  wealth  of  the  community.  This 


260  THE  NATURE  OF  WEALTH.  Book  II. 

consorted  with  the  common  idea  that  the  wealth  of  a  com- 
munity is  the  sum  of  the  wealth  of  individuals,  and  enabled 
all  that  has  value  to  the  individual  to  be  included  as  po- 
litico-economic wealth.  It  consorted  as  wealth  with  the 
disposition  of  the  wealthy  class  to  give  a  moral  sanction 
to  whatever  was  to  them  superiority,  and  has  thus  been 
perpetuated  by  economist  after  economist. 

But  it  was  impossible  to  treat  as  one  and  the  same 
quality  a  value  that  added  to  the  wealth  of  the  community 
and  a  value  that  did  not,  and  yet  to  make  a  politico-eco- 
nomic definition  of  wealth.  This  therefore  has  been  the 
point  on  which  the  political  economy  founded  by  Adam 
Smith  has  been  constantly  at  sea.  It  could  not  be  a 
political  economy  until  it  had  defined  wealth,  and  it 
could  not  define  wealth  until  it  had  recognized  a  distinction 
.between  two  kinds  of  value. 

This  difficulty  might  have  been  avoided  in  the  beginning 
by  giving  to  the  two  kinds  of  value  separate  names,  but 
the  word  value  has  so  long  been  used  for  both,  that  the 
best  a  science  of  political  economy  can  do  now,  is  to  dis- 
tinguish between  value  of  the  one  kind  and  value  of  the 
other  kind. 

This  however  it  is  necessary  to  attempt.  The  best  thing 
I  can  do  is  to  distinguish  value,  not  as  one,  but  as  of  two 
kinds. 

By  a  clear  distinction,  the  various  ways  in  which  value 
may  originate,  embrace  (1)  the  value  which  comes  from 
the  exertion  of  labor  in  such  a  way  as  to  save  future  exer- 
tion in  obtaining  the  satisfaction  of  desire ;  and,  (2)  the 
value  which  comes  from  the  acquisition  of  power  on  the 
part  of  some  men  to  command  or  compel  exertion  on  the 
part  of  others,  or,  which  is  the  same  thing,  from  the  im- 
position of  obstacles  to  the  satisfaction  of  desire  that 
render  more  exertion  necessary  to  the  production  of  the 
same  satisfaction. 


Chap.  XIV.       THE  TWO   SOURCES  OF  VALUE.  261 

Value  arising  in  the  first  mode  may  be  distinguished  as 
"  value  from  production/7  and  value  arising  in  the  second 
mode  may  be  distinguished  as  "value  from  obligation"— 
for  the  word  obligation  is  the  best  word  I  can  think  of 
to  express  everything  which  may  require  the  rendering 
of  exertion  without  the  return  of  exertion. 

Value  in  the  sense  of  exchange  value,  the  only  sense  in 
which  it  can  be  properly  used  in  political  economy,  since 
this  has  now  been  fixed  by  usage,  is  one  and  the  same 
quality,  just  as  the  water  that  flows  through  the  outlet  of 
the  Nile  or  Mississippi  is  one  and  the  same  stream.  But 
as  we  distinguish  the  sources  of  these  waters  as  the  White 
Nile  and  the  Blue  Nile,  or  as  the  Upper  Mississippi,  the 
Missouri,  the  Ohio,  etc.,  so  we  may  distinguish  as  to  origin, 
between  value  from  production  and  value  from  obligation. 
The  mere  recognition  that  there  is  such  a  difference  in  the 
origins  of  value  would  of  itself  do  much  to  extricate  po- 
litical economy  from  the  utter  maze  into  which  a  century 
of  cultivation  has  brought  it  in  the  closing  years  of  the 
nineteenth  century. 

But  while  making  this  distinction  it  must  be  remembered 
that  the  essential  character  of  value  is  always  that  of  equiva- 
lence to  exertion  in  the  satisfaction  of  desire.  The  value  of 
a  thing,  in  short,  is  the  amount  of  toil  and  trouble  which  it 
will  save  to  the  possessor  (as  in  the  case  of  a  Crusoe),  or 
(as  is  the  usual  case)  others  may  be  willing  to  undertake  in 
exchange  for  it.  This  is  not  necessarily  the  toil  and  trouble 
which  the  purchaser  will  agree  in  his  own  person  to  undergo, 
but  the  toil  and  trouble  which  he  had  power  to  command 
or  to  induce  others  to  undergo,  and  of  which  he  can  thus 
dispense  the  seller  in  the  attainment  of  his  desire.  No 
matter  how  this  quality  attaches  to  them,  whether  by  value 
from  production,  or  by  value  from  obligation,  things  have 
value  when,  so  long,  and  so  far,  as  they  will  purchase  ex- 
emption from  toil  and  trouble  in  the  attainment  of  desire. 


262  THE  NATURE  OF  WEALTH.  Book  II. 

That  "debt  is  slavery"  is  not  merely  a  metaphorical 
expression.  It  is  literally  true  in  this,  that  debt  involves, 
though  it  may  be  in  limited  degree,  the  same  obligation  of 
rendering  exertion  without  return  as  does  slavery.  When 
under  the  form  of  exchange  I  receive  services  or  commod- 
ities from  another,  asking  him  to  forego  the  receipt  on  his 
part  of  what  I  should  by  the  terms,  expressed  or  implied, 
of  our  exchange,  receive  in  return  from  him,  I  assume  an 
obligation,  though  probably  to  a  limited  extent  and  with 
limited  sanctions,  to  render  to  him  labor,  or  the  results  of 
labor,  without,  so  far  as  it  goes,  any  return  on  his  part. 
Such  a  debt  may  be  a  mere  debt  of  conscience,  which  he 
may  have  no  means  of  proving,  or  have  no  legal  means  of 
collecting,  even  if  he  could  prove  it ;  or  it  may  be  a  mere 
debt  of  honor,  which  is  the  name  we  give  to  debt  held 
morally  binding,  but  which  the  municipal  law  may  refuse 
to  help  us  to  collect  j  or  it  may  be  witnessed  by  other  per- 
sons or  writings,  or  by  the  assignment  of  releases  of  specific 
things  as  in  mortgages ;  or  by  the  agreements  of  others  to 
pay  if  I  do  not,  as  is  the  case  of  negotiable  notes.  But 
while  all  this  may  affect  the  ease  with  which  I  may  dispose 
of  my  obligation  to  another  and  the  value  I  can  get  in  re- 
turn for  it,  the  essential  principle  of  these  different  forms 
of  obligation  is  the  same.  It  is  the  same  in  so  far  as  it 
goes  as  the  obligation  to  render  exertion,  as  that  which 
gave  their  exchangeable  value  to  slaves,  and  which  is  in 
fact  the  type  of  all  debts  of  obligation. 

The  term  "  value  from  obligation  "  will  at  once  be  recog- 
nized as  including  an  immense  body  of  the  values  dealt 
with  by  banks,  stock  exchanges,  trust  companies,  or  held 
by  private  individuals,  and  which  are  commonly  known  as 
obligations  or  securities.  But  it  may  require  a  little  re- 
flection to  see  how  much  else  there  is  having  value  which 
is  really  value  from  obligation.  All  debts  and  claims  of 
whatever  kind,  whether  they  be  what  the  lawyers  call 


Chap.  XIV.       THE  TWO  SOURCES  OF  VALUE.  263 

choses  in  action  or  mere  debts  of  honor  or  good  faith  un- 
recognized by  law,  all  special  privileges  and  franchises, 
patents,  and  the  beneficial  interests  known  as  good- will,  in 
so  far  as  they  have  value,  have  it  as  value  from  obligation. 
The  value  of  slaves  wherever  slavery  exists— and  only  a  few 
years  ago  the  market  value  of  slaves  in  the  United  States 
was  estimated  in  round  numbers  at  three  thousand  million 
dollars— is  clearly  a  value  of  obligation,  springing  not  from 
production,  but  from  the  obligation  imposed  on  the  slave 
to  work  for  the  master.  So  too  with  the  value  of  public 
pensions  and  the  incumbency  of  profitable  offices  and 
places,  when  they  are  made  matters  of  bargain  and  sale, 
which  is  in  some  cases  yet  done  in  England  and  which  is 
I  fear  to  a  still  larger  extent  yet  done  in  the  United  States, 
though  surreptitiously,  as  it  is  habitually  done  in  China 
where  "  civil  service  reform  "  has  for  centuries  prevailed. 

In  English  newspapers  one  may  yet  occasionally  read 
advertisements  for  the  sale  of  advowsons  for  the  cure  of 
souls.  The  exchange  value  that  they  have  is  of  course 
from  obligation.  Up  to  a  few  years  ago  there  were  similar 
advertisements  for  the  sale  of  commissions  in  the  army 
and  navy.  These  are  but  survivals  of  an  earlier  and  per- 
haps clearer  type  of  nomenclature.  The  value  they  have 
is  clearly  a  value  from  obligation.  And  the  same  thing  is 
true  under  more  modern  forms,  of  rights  given  by  protec- 
tive duties,  by  civil-service  regulations,  and  franchises,  and 
patents,  and  forms  of  good-will.  All  these  things  have 
value  only  as  "  value  from  obligation." 

Among  the  valuable  assessments  of  the  large  landholders 
of  feudal  times  was  the  right  of  holding  markets,  of  keep- 
ing dove-cotes,  of  succeeding  in  certain  instances  to  the 
property  of  tenants;  or  of  grinding  grain,  of  coming 
money,  of  collecting  floatwood,  etc.  The  values  of  these 
were  clearly  "  values  from  obligation."  But  that  they  have 
passed  insensibly  into  the  single  right  of  exacting  a  rent 


264  THE  NATURE  OF  WEALTH.  Book  II. 

for  the  use  of  land  is  proof  that  the  value  of  this  right— 
the  right,  as  it  is  called,  of  private  ownership  of  land— is 
in  reality  a  "  value  from  obligation." 

These  ways  of  giving  an  additional  value  to  things  al- 
ready in  existence  or  of  bringing  out  value  in  things  which 
may  have  no  more  tangible  existence  than  an  act  of  mind, 
a  verbal  promise,  a  paper  note,  an  act  of  legislature,  a  de- 
cision of  court  or  a  common  habit  or  custom,  are  clearly 
of  totally  different  origin  and  nature  from  the  ways  in 
which  value  originates  by  the  expenditure  of  labor  in  the 
production  of  wealth  or  services,  and  readily  to  distinguish 
them  we  need  a  classifying  name.  It  is  because  the  word 
obligation  best  consorts  with  existing  customs,  and  best 
expresses  the  common  character  of  the  element  distinct 
from  production  that  gives  value,  that  I  speak  of  value 
from  obligation  as  distinct  from  value  from  production. 
For  the  common  character  of  all  that  I  am  here  speaking 
of  is  that  their  possession  enables  the  possessor  to  com- 
mand or  compel  others  to  render  exertion  without  any 
return  of  exertion  on  his  part  to  them.  This  power  to 
command  labor  without  the  return  of  labor  constitutes  on 
the  other  side  an  obligation,  and  it  is  this  that  gives  value. 

Thus  a  verbal  promise,  a  bank-account,  a  promissory 
note,  or  any  other  instrument  of  indebtedness,  an  annuity, 
an  insurance  policy,  things  which  frequently  have  value, 
derive  that  value  from  the  fact  that  they  express  an  obli- 
gation fixed,  unfixed  or  merely  contingent  to  render  exer- 
tion to  the  holder  or  assignee  without  return.  Thus  value 
may  be  increased  sometimes  even  by  the  destruction  of 
valuable  things,  as  the  Dutch  East  India  Company  kept 
up  the  value  of  spices  in  Europe  by  destroying  great 
quantities  of  spices  in  the  islands  where  they  grew;  and 
as  our  "  protective  "  tariff  makes  certain  things  more  valu- 
able in  the  United  States  than  they  would  otherwise  be, 
by  imposing  fines  and  penalties  on  bringing  them  into  the 


Chap.  XIV.       THE  TWO   SOURCES  OF  VALUE.  265 

country ;  or  as  strikes,  as  we  have  recently  seen  in  Aus- 
tralia, in  England  and  in  America,  may  increase  the  value 
of  coal  or  other  products  5  or  as  a  drought,  which  causes 
great  loss  of  the  corn  crop  over  wide  areas,  may  increase 
the  value  of  corn,  or  as  a  war  which  lessens  the  supply  of 
cotton  in  England  may  increase  the  value  of  cotton  there. 

All  such  additions  to  value  are  of  "  value  from  obliga- 
tion," which  can  no  more  affect  the  general  stock  than  can 
what  Jack  wins  from  Tom  in  a  game  of  cards. 

But  the  most  important  of  these  additions  to  value 
which  do  not  increase  wealth  are  unquestionably  to  be 
found  in  land  value,  the  form  of  value  from  obligation 
which  in  the  progress  of  mankind  to  civilization  tends 
most  rapidly  to  increase,  and  which  has  already  in  the 
modern  world  assumed  perhaps  more  than  the  relative 
importance  that  slavery  once  held  in  the  ancient  world. 
In  an  England  or  a  United  States,  or  any  other  highly 
civilized  country,  this  importance  is  already  so  great  that 
the  selling  value  of  the  land  is  the  selling  value  of  all  im- 
provements and  personal  property,  in  short  of  all  "  value 
from  production;"  while  it  is  the  one  thing  which  the 
natural  progress  of  society,  in  short  all  improvements  of 
whatever  kind,  tend  constantly  to  augment.  Yet  this 
value  is  not  a  part  of  wealth  in  the  economic  sense.  It 
can  have,  so  far  as  the  individual  is  concerned,  none  of 
the  moral  sanctions  of  property.  It  rightfully  belongs  to 
no  individual  or  individuals  but  to  the  community  itself. 
Considered  by  the  vulgar  as  the  highest  form  and  very 
type  of  wealth,  land  in  reality  is  to  the  political  economist 
not  wealth  at  all. 

And  this  is  the  reason  that  neither  by  Adam  Smith  nor 
by  those  who  succeeded  him,  however  much  they  may  have 
differed  as  to  tweedledum  and  tweedledee,  has  the  true 
character  and  dual  nature  of  value  been  realized.  For  to 
recognize  that  is  to  come  to  the  conclusion  of  the  Physio- 


266  THE  NATURE  OF  WEALTH.  Book  II. 

crats  that,  in  the  economic  sense,  land  is  not  wealth.  And 
this  involves  a  revolution,  albeit  to  society  a  beneficent 
revolution,  greater  than  the  world  has  yet  seen. 

Yet  it  is  perfectly  clear.  Let  us  go  back  in  thought  to 
our  imaginary  Isle  of  Eden,  and  suppose  that  its  dis- 
coverers, instead  of  making  merchandise  of  the  inhabitants 
themselves,  had  done  at  once  what  the  American  mission- 
aries have  done  gradually  in  the  Hawaiian  Islands— made 
themselves  owners  of  the  land  of  the  island,  and  with 
power  to  enforce  their  claim  by  punishment,  had  forbidden 
any  islander  to  pluck  of  a  tree  or  drink  of  a  spring  with- 
out their  permission.  Land  before  valueless  would  at  once 
become  valuable,  for  the  islanders  having  nothing  else  to 
give  would  be  compelled  to  render  exertion,  or  the  prod- 
ucts of  exertion,  for  the  privilege  of  continuing  in  life. 
/  And  that  this  quality  attaching  to  things,  of  purchasing 
by  exchange  exemption  from  the  toil  and  trouble  in  the 
attainment  of  desire,  is  what  is  commonly  meant  by  value 
]  in  exchange  a  little  analysis  will  show.  "  The  value  of  a 
/  thing  is  just  what  you  can  get  for  it,"  is  a  saying,  current 
among  men  who  have  never  bothered  their  heads  with  po- 
litical economy,  which  concisely  expresses  the  conception 
of  value.  A  thing  has  no  value  for  which  nothing  can  be 
got  in  exchange,  and  it  has  value  when,  so  long  as,  and  to 
the  degree  that,  it  may  be  exchanged  for  some  other  thing 
•  or  things. 

But  all  things  having  value  cannot  be  exchanged  for 
all  other  things  having  value.  I  could  not,  for  instance, 
exchange  a  million  dollars'  worth  of  cheese-cakes  for  a 
building  worth  a  million  dollars.  What  then  is  the  one 
thing  for  which  all  things  having  value  must  directly  or 
indirectly  exchange  ?  We  are  apt  to  ignore  that  question, 
because  we  habitually  think  of  value  in  terms  of  money, 
which  serves  us  as  a  flux  for  the  exchange  of  all  values, 
and  because  we  are  apt  to  think  of  labor  as  a  valuable 


Chap.  XIV.       THE  TWO  SOURCES  OF  VALUE.  267 

thing,  without  distinguishing  the  different  senses  in  which 
we  use  the  word.  But  if  we  press  the  question,  we  see 
that  everything  having  value  must  be  ultimately  exchange 
able  into  human  exertion,  and  that  it  is  in  this  that  its 
value  consists.  There  are  some  valuable  things  that  cannot 
readily,  and  some  that  it  is  practically  impossible  to  ex- 
change for  exertion— such,  for  instance,  as  an  equatorial 
telescope,  a  locomotive,  a  steamship,  a  promissory  note  or 
bond  of  large  amount,  or  a  bank-note  or  greenback  of  high 
denomination.  But  they  derive  their  value  from  the  fact 
that  they  can  be  exchanged  for  things  that  can  in  turn  be 
exchanged  for  exertion. 

Money  itself  derives  its  power  of  serving  as  a  medium 
or  flux  of  exchanges  from  the  fact  that  it  is  of  all  things 
that  which  is  most  readily  exchangeable  for  exertion,  and 
it  utterly  loses  value  when  it  ceases  to  be  exchangeable  for 
exertion.  This  we  have  seen  in  the  United  States  in  the 
case  of  the  Continental  currency,  in  the  case  of  the  notes 
of  broken  State  banks  and  in  the  case  of  the  Confederate 
currency.  Thus  value  ends  as  it  begins,  with  the  power 
of  commanding  exertion,  and  is  always  measured  by  that 
power. 

Again,  as  before,  we  find  that  Adam  Smith  was  right  in 
the  clear  though  evanescent  gleam  that  he  got  of  the  nature 
of  value.  Value  in  the  economic  sense  is  not  a  mere  rela- 
tion of  exchangeability  between  valuable  things,  which, 
save  relatively,  as  between  one  particular  thing  and  an- 
other particular  thing,  can  neither  increase  nor  diminish. 
The  real  relation  of  value  is  with  human  exertion,  or  rather 
with  the  toil  and  trouble  that  are  the  inseparable  adjuncts 
of  exertion  j  and  the  true  and  absolute  value  of  anything, 
that  which  makes  it  comparable  with  that  of  any  or  all 
other  things  in  all  times  and  places,  is  the  difficulty  or  ease 
of  acquiring  it.  That  is  of  high  value  which  is  hard  to 
get  j  that  is  of  low  value  which  is  easy  to  get  j  while  that 


268  THE  NATURE  OF  WEALTH.  EookIL 

which  may  be  had  without  exertion  and  that  which  no  one 
will  undergo  exertion  to  get  are  of  no  value  at  all.  Cheap- 
ness or  low  value  is  the  result  of  abundance ;  dearness  or 
high  value  the  result  of  scarcity.  The  one  means  that  the 
satisfactions  of  desire  may  be  obtained  with  little  effort, 
the  other  that  they  can  be  obtained  only  with  much  effort. 
Thus  there  may  be  general  increase  or  decrease  of  value  as 
clearly  and  as  truly  as  there  may  be  general  scarcity  or 
general  abundance. 

The  recognition  of  this  simple  theory  of  value  will  enable 
us  as  we  proceed  to  clear  up  with  ease  and  certainty  many 
points  which  have  perplexed  the  economists  who  have 
ignored  it,  and  are  to  their  students  stumbling-blocks, 
which  make  them  doubt  whether  any  real  science  of 
political  economy  is  possible.  In  its  light  all  the  complex 
phenomena  of  value  and  exchange  become  clear,  and  are 
seen  to  be  but  illustrations  of  that  fundamental  law  of 
the  human  mind  which  impels  men  to  seek  the  gratifica- 
tion of  their  desires  with  the  least  exertion. 

(Whatever  increases  the  obstacles,  natural  or  artificial, 
to  the  gratification  of  desire  on  the  part  of  the  ultimate 
users  or  consumers  of  things,  thus  compelling  them  to  ex- 
pend more  exertion  or  undergo  more  toil  and  trouble  to 
obtain  those  things,  increasesjtheir  value ;  whatever  lessens 
the  exertion  that  must  be  expended  orTHe  toil  and  trouble 
that  must  be  undergone,  decreases  value.  Thus,  wars, 
tariffs,  pirates,  public  insecurity,  monopolies,  taxes  and 
restrictions  of  all  kinds,  which  render  more  difficult  the 
satisfaction  of  the  desire  for  certain  things,  increase  their 
value,  and  discoveries,  inventions  and  improvements  which 
lessen  the  exertion  required  for  bringing  things  to  the 
satisfaction  of  desire,  lessen  their  value. 

Here  we  may  see  at  once  the  clear  solution  of  a  ques- 
tion which  has  perplexed  and  still  perplexes  many  minds 
—the  question  whether  the  artificial  increase  of  values  by 


Chap.  XIV.       THE  TWO  SOURCES  OF  VALUE.  269 

governmental  restriction  is  or  is  not  in  the  interest  of  the 
community.  When  we  regard  value  as  a  simple  relation 
of  exchangeability  between  exchangeable  things,  there  may 
seem  room  for  debate.  But  when  we  see  that  its  relation 
is  to  the  toil  and  trouble  which  must  be  undergone  by  ulti- 
mate users  in  the  satisfaction  of  desire,  there  is  no  room 
for  debate.  Scarcity  may  be  at  times  to  the  relative  in- 
terest of  the  few ;  but  abundance  is  always  to  the  general 
interest. 


CHAPTER  XV. 

THE  MEANING  OF  WEALTH  IN  POLITICAL 
ECONOMY. 

SHOWING  HOW  VALUE  FROM  PRODUCTION  IS  WEALTH  IN 
POLITICAL  ECONOMY. 

Wealth  as  fixed  in  "Progress  and  Poverty  "—Course  of  the  scholastic 
political  economy — The  reverse  method  of  this  work — The  con- 
clusion the  same— Reason  of  the  disposition  to  include  all  value 
as  wealth— Metaphorical  meanings— Bull  and  pun —Metaphor- 
ical meaning  of  wealth— Its  core  meaning— Its  use  to  express 
exchangeability — Similar  use  of  money — Ordinary  core  meaning 
the  proper  meaning  of  wealth— Its  use  in  individual  economy  and 
in  political  economy— What  is  meant  by  increase  of  wealth- 
Wealth  and  labor— Its  factors  nature  and  man— Wealth  their 
resultant — Of  Adam  Smith — Danger  of  carrying  into  political 
economy  a  meaning  proper  in  individual  economy — Example  of 
"money  "— "Actual  wealth "  and  "relative  wealth  "— "  Value  from 
production "  and  "value  from  obligation  "—The  English  tongue 
has  no  single  word  for  an  article  of  wealth— Of  "commodities" 
—Of  "goods"— Why  there  is  no  singular  in  English— The  at- 
tempt to  form  one  by  dropping  the  "  s  "  and  Anglo-German  jargon. 

WE  are  now  in  a  position  to  fix  the  meaning  of 
wealth  as  an  economic  term. 

In  "  Progress  and  Poverty,"  which  I  desired  to  make 
as  brief  as  possible,  and  where  my  main  purpose  was  to 
fix  the  meaning  of  the  word  capital,  I  fixed  the  meaning 
of  the  word  wealth  directly,  as  "natural  products  so 

270 


Chap.  XV.        WEALTH  IN  POLITICAL  ECONOMY.  271 

secured,  moved,  combined  or  altered  by  human  labor  as  to 
fit  them  for  human  satisfaction."  This  also  was  the  way 
in  which,  as  I  understand  it,  the  Physiocrats,  who  came 
substantially  to  the  same  conclusion,  had  defined  it.  But 
the  scholastic  political  economists,  instead  of  either  dis- 
covering for  themselves  or  taking  my  hint,  continued  on 
the  road  by  which  Adam  Smith  had  avoided  saying  finally 
what  wealth  was.  They  continued  to  discuss  the  word 
value,  so  confused  in  its  various  senses,  in  such  manner 
as  to  give  not  only  no  conclusion  as  to  the  real  meaning  of 
wealth,  but  finally  to  actually  destroy  political  economy 
itself. 

Thus  the  confusion  into  which,  after  more  than  a  hun- 
dred years  of  cultivation,  the  teaching  of  political  econ- 
omy has  fallen  as  to  the  meaning  of  its  principal  term— a 
confusion  which  is  in  reality  even  greater  than  in  ordinary 
speech,  that  makes  no  pretensions  to  exactness  in  the  use 
of  the  word— is  clearly  due  to  confusions  as  to  the  meaning 
of  the  term  value.  The  scholastic  development  of  po- 
litical economy  since  Adam  Smith  has  not  only  confused 
the  distinction  between  value  in  use  and  value  in  exchange^ 
but  it  has  tended  to  cover  up  the  vital  distinction  between] 
the  two  sources  of  value  in  exchange  j  that  originating  in  / 
the  storing  up  of  labor,  and  that  originating  in  what  I  have 
called  obligation— often  power,  devoid  of  moral  right,  to 
compel  the  expenditure  of^abpr: — 

This  is  the  condition  in  which  the  orthodox  political 
economy  now  is.  It  has  not  only  not  discovered  what  its 
principal  term,  wealth  in  the  economic  sense,  really  is,  but 
it  has  so  confounded  other  terms  as  to  give  little  light  on 
the  search. 

In  this  work  therefore  I  have  adopted  a  different  method 
from  that  employed  in  "  Progress  and  Poverty."    Finding    . 
it  necessary  to  discuss  the  meaning  of  the  term  value  in 
a  fuller  w^ay  than  I  had  before  done,  and  seeing  that  in 


272  THE  NATURE  OF  WEALTH.  Boole  II. 

the  current  political  economy  the  only  consensus  of  opinion 
was  that  all  wealth  had  value,  I  adopted  a  method  the 
reverse  of  that  of  "  Progress  and  Poverty,'7  and  instead  of 
beginning  with  wealth,  began  with  value.  Commencing 
with  Adam  Smith  and  inquiring  what  was  meant  by  value, 
I  found  that  in  value  were  included  two  absolutely  differ- 
ent things,  namely,  the  quality  of  value  from  production, 
and  the  quality  of  value  from  obligation,  one  of  which 
kinds  of  value  resulted  in  wealth  and  the  other  of  which 
did  not.  Now,  value  from  production,  which  is  the  only 
kind  of  value  which  gives  wealth,  consists  in  application 
of  labor  in  the  production  of  wealth  which  adds  to  the 
common  stock  of  wealth.  Wealth,  therefore,  in  political 
economy  consists  in  natural  products  so  secured,  moved, 
combined  or  altered  by  human  labor  as  to  fit  them  for 
human  satisfaction.  Value  from  obligation,  on  the  other 
hand,  though  a  most  important  element  of  value,  does  not 
result  in  increase  in  the  common  stock,  or  in  the  produc- 
tion of  wealth.  It  has  nothing  whatever  to  do  with  the 
production  of  wealth,  but  only  with  the  distribution  of 
wealth,  and  its  proper  place  is  under  that  heading. 

Thus  in  the  way  I  have  in  this  work  adopted,  that  of 
proceeding  analytically  from  value,  we  come  to  precisely 
the  same  conclusion  as  that  reached  in  "Progress  and 
Poverty,"  where  we  proceeded  directly  and  by  deduction 
—we  come  to  the  result  that  wealth  in  the  politico-eco- 
nomic sense  consists  in  natural  substances  that  have  been 
so  secured,  moved,  combined  or  altered  by  human  labor 
as  to  fit  them  for  human  satisfaction.  Such  substances  are 
wealth  and  always  have  value.  "When  they  cease  to  have 
value  they  of  course  cease  to  be  wealth. 

Thus,  proceeding  by  the  way  adopted  in  this  work,  we 
reach  precisely  the  same  conclusion  as  to  wealth  as  by  the 
way  adopted  in  my  previous  work.  The  advantages  of 
adopting  this  mode  here  are  that  a  conclusion  reached  by 


Chap.  XV.        WEALTH  IN  POLITICAL  ECONOMY.  273 

the  methods  familiar  to  the  students  of  the  scholastic  po- 
litical economy  can  with  difficulty  be  ignored  by  them,  and 
that  in  going  in  this  way  over  the  subject  of  value  much 
has  been  seen  both  for  the  present  and  the  future  that  was 
necessary  to  a  full  treatise  on  the  science  of  political  econ- 
omy and  that  may  elsewhere  be  dispensed  with. 

I  wish  therefore  particularly  to  call  the  attention  of  the 
reader  to  what  has  been  here  done.  Not  that  I  hope  that 
anything  that  I  can  do,  unaccompanied  or  unsucceeded  by 
a  great  change  in  general  conditions,  can  long  keep  down 
the  disposition  which  this  tendency  of  political  economy 
that  I  have  alluded  to  shows. 

As  there  is  a  reason  for  everything,  in  the  mental  world 
as  truly  as  in  the  physical  world,  so  there  is  a  reason  for 
this  disposition  to  include  in  the  term  wealth  everything 
that  has  value,  without  regard  to  the  origin  of  that  value. 
It  springs  at  bottom  from  the  desire  on  the  part  of  those 
who  dominate  the  accredited  organs  of  education  and 
opinion  (who  wherever  there  is  inequality  in  the  distribu- 
tion of  wealth  are  necessarily  the  wealthy  class)  to  give  to 
the  mere  legal  right  of  property  the  same  moral  sanction 
that  justly  attaches  to  the  natural  right  of  property,  or  at 
the  very  least  to  ignore  anything  that  would  show  that 
the  recognition  of  a  legal  right  may  involve  the  denial  of 
a  moral  right.  As  the  defenders  of  chattel  slavery,  and 
those  who  did  not  wish  to  offend  the  slave  power,  not  long 
since  dominant  in  the  United  States,  were  obliged  to  stop 
their  examination  of  ownership  with  purchase,  assuming 
that  the  purchase  of  a  slave  carried  with  it  the  same  right 
of  ownership  as  did  the  purchase  of  a  mule  or  of  a  bale  of 
cotton,  so  those  who  would  defend  the  industrial  slavery 
of  to-day,  or  at  least  not  offend  the  wealth  power,  are 
obliged  to  stop  their  examination  of  the  nature  of  wealth 
with  value,  assuming  that  everything  that  has  value  is 
therefore  wealth,  thus  involving  themselves  and  leaving 


274  THE  NATURE  OF  WEALTH.  Book  II. 

their  students  in  a  fog  of  confusions  as  to  the  nature  of 
the  thing  whose  laws  they  profess  to  examine. 

But  to  whomsoever  wishes  really  to  understand  political 
economy  there  is  now  no  difficulty  in  coming  to  a  clear  and 
precise  determination  of  the  nature  of  wealth,  whichever 
way  he  may  elect  to  begin. 

The  power  of  the  imagination,  nay  even  that  power  of 
recognizing  likeness  and  unlikeness,  in  which  perception 
itself  consists,  always  expands  by  metaphor  the  primary 
or  fundamental  meaning  of  a  word  in  common  use,  and  it 
is  by  reason  of  this,  even  more  than  by  the  adoption  of 
new  root  words,  that  a  language  grows  in  copiousness, 
flexibility  and  beauty.  Thus  such  words  as  light  and  dark- 
ness, sunshine  and  rain,  to  eat  and  to  drink,  are  put  by 
metaphor  and  simile  to  a  multiplicity  of  uses  in  common 
speech.  We  speak  of  the  light  of  hope,  or  the  light  that 
beats  upon  a  throne,  or  the  light  of  events ;  of  a  dark  pur- 
pose, or  a  dark  saying,  or  a  darkened  intellect;  of  the 
sunshine  of  love  or  prosperity,  or  of  a  sunny  countenance ; 
of  a  rain  of  bullets,  or  a  rain  of  misfortunes,  or  a  rain  of 
questions  or  epithets ;  of  a  ship  eating  into  the  wind,  of 
rust  eating  iron,  or  of  a  man  eating  his  own  words ;  of  a 
sword  drinking  blood,  or  of  a  lover  drinking  in  the  looks, 
words  or  actions  of  a  loved  one.  But  such  use  of  words 
in  common  speech  causes  no  confusion  as  to  their  original 
and  fundamental  meaning,  the  core  from  which  all  figura- 
tive use  of  them  proceeds.  The  broad  humor  of  the  Irish 
bull  comes  from  our  prompt  recognition  of  the  difference 
between  core  meaning  and  figurative  meaning;  and  the 
offensiveness  of  the  deliberate  pun,  from  the  impertinence 
of  the  implied  assumption  that  we  will  not  quickly  recog- 
nize this  difference. 

Now,  in  common  speech  the  word  wealth  takes  on 
such  figurative  meanings  as  do  all  other  words  in  common 
use.  We  speak  of  the  night's  wealth  of  stars,  of  a  poet's 


Chap.  XV.        WEALTH  IN  POLITICAL  ECONOMY.  275 

wealth  of  imagery,  of  an  orator's  wealth  of  expression,  of 
a  woman's  wealth  of  hair,  of  a  student's  wealth  of  know- 
ledge, or  of  the  wealth  of  resource  of  a  general,  a  states- 
man or  an  inventor  •  of  a  porcupine's  wealth  of  quills  or  a 
bear's  wealth  of  fur.  But  such  uses  of  the  word  wealth 
impose  no  difficulty.  They  are  merely  metaphorical  ex- 
pressions of  abundance.  So,  too,  it  is  with  what  is  called 
natural  wealth.  We  speak  of  rich  ore  and  poor  ore,  of 
rich  land  and  poor  land,  of  a  naturally  rich  country  and  a 
naturally  poor  country  ;  of  a  wealth  of  forest  or  mines  or 
fisheries;  of  a  wealth  of  lakes  or  rivers,  or  a  wealth  of 
beautiful  scenery.  But  where  anything  more  than  abun- 
dance is  expressed  in  such  uses  of  the  word  wealth  it 
is  that  of  natural  opportunity,  or  that  of  utility,  or  value 
in  use,  with  which  in  its  fundamental  sense  wealth  has 
nothing  to  do.  With  that  fundamental  or  core  meaning 
of  the  word  wealth,  from  which  all  such  figurative  uses 
spring,  is  inextricably  blended  the  idea  of  human  produc- 
tion. Whatever  exists  without  man's  agency,  was  here 
before  he  came,  and  will,  so  far  as  we  can  see,  be  here  after 
he  is  gone  j  or  whatever  is  included  in  man  himself,  how- 
ever well  the  figurative  use  of  the  word  wealth  may  serve 
to  express  its  abundance  or  usefulness,  cannot  be  wealth 
in  the  fundamental  or  core  meaning  of  the  word. 

So,  too,  is  the  still  more  common  use  of  the  word 
wealth  to  express  the  power  of  exchangeability  or  of 
commanding  exertion.  As  commonly  used  the  word 
wealth  when  applied  to  the  possessions  of  an  individual 
includes  all  purchasing  power,  and  is  indeed  in  most  cases 
synonymous  with  exchange  value.  But  this  use  of  the 
word  is  really  representative,  like  the  similar  use  we  make 
of  the  word  money.  We  say  that  a  man  has  so  much 
money,  or  so  many  dollars  or  pounds,  without  meaning, 
or  being  understood  as  meaning,  that  he  has  in  his  posses- 
sion so  much  actual  money.  We  mean  only  that  he  has 


276  THE  NATURE  OF  WEALTH.  Book  II. 

what  would  exchange  for  so  much  money.  Such  repre- 
sentative use  of  the  word  money  or  of  the  terms  of 
money  does  not,  in  every-day  affairs,  in  the  least  confuse 
us  as  to  the  real  meaning  of  the  word.  If  asked  to  explain 
what  money  is,  no  one  would  think  of  saying  that  sheep 
and  ships,  and  lands  and  houses  are  money,  although  he 
is  in  the  constant  habit  of  speaking  of  their  possession  as 
the  possession  of  money. 

So  it  is  with  the  common  use  of  the  word  wealth. 
Many  things  are  commonly  spoken  of  as  wealth  which  we 
all  know,  in  the  true  and  fundamental  meaning  of  the 
word,  are  not  wealth  at  all. 

If  you  take  an  ordinarily  intelligent  man  whose  powers 
of  analysis  have  not  been  muddled  by  what  the  colleges 
call  the  teaching  of  political  economy,  and  ask  him  what 
he  understands  at  bottom  by  wealth,  it  will  be  found  at 
last,  though  it  may  require  repeated  questioning  to  elimi- 
nate metaphor  and  representation,  that  the  kernel  of  his 
idea  of  wealth  is  that  of  natural  substances  or  products  so 
changed  in  place,  form  or  combination  by  the  exertion  of 
human  labor  as  to  fit  them  or  fit  them  better  for  the  satis- 
faction of  human  desire. 

This,  indeed,  is  the  true  meaning  of  wealth,  the  meaning 
of  what  I  have  called  "  value  from  production."  It  is  the 
meaning  to  which  in  political  economy  the  word  wealth 
must  be  carefully  restricted.  For  political  economy  is  the 
economy  of  communities  or  nations.  In  the  economy  of 
individuals,  to  which  our  ordinary  speech  usually  refers, 
the  word  wealth  is  commonly  applied  to  anything  having 
an  exchange  value  as  between  individuals.  But  when 
used  as  a  term  of  political  economy  the  word  wealth 
must  be  limited  to  a  much  more  definite  meaning.  Many 
things  are  commonly  spoken  of  as  wealth  in  the  hands  of 
the  individual,  which  in  taking  account  of  collective  or 
general  wealth  cannot  be  included.  Such  things  having 


Chap.  XV.        WEALTH  IN  POLITICAL  ECONOMY.  277 

exchange  value,  are  commonly  spoken  of  as  wealth,  since 
as  between  individuals  or  between  sets  of  individuals  they 
represent  the  power  of  obtaining  wealth.  But  they  are 
not  really  wealth,  inasmuch  as  their  increase  or  decrease 
does  not  affect  the  sum  of  wealth.  Such  are  bonds,  mort- 
gages, promissory  notes,  bank-bills,  or  other  stipulations 
for  the  transfer  of  wealth.  Such  are  franchises,  which 
represent  special  privileges,  accorded  to  some  and  denied 
to  others.  Such  were  slaves,  whose  value  represented 
merely  the  power  of  one  class  to  appropriate  the  earnings 
of  another  class.  Such  are  lands  or  other  natural  oppor- 
tunities, the  value  of  which  results  from  the  acknowledg- 
ment in  favor  of  certain  persons  of  an  exclusive  legal  right 
to  their  use,  and  the  profit  of  their  use,  and  which  repre- 
sents only  the  power  thus  given  to  the  mere  owner  to  de- 
mand a  share  of  the  wealth  produced  by  use.  Increase  in 
the  value  of  bonds,  mortgages,  notes  or  bank-bills  cannot 
increase  the  wealth  of  a  community  that  includes  as  well 
those  who  promise  to  pay  as  those  who  are  entitled  to  re- 
ceive. Increase  in  the  value  of  franchises  cannot  increase 
the  wealth  of  a  community  that  includes  those  who  are 
denied  special  privileges  as  well  as  those  who  are  accorded 
them.  The  enslavement  of  a  part  of  their  number  could 
not  increase  the  wealth  of  a  people,  for  more  than  the  en- 
slavers gained  the  enslaved  would  lose.  Increase  in  land 
values  does  not  represent  increase  in  the  common  wealth, 
for  what  landowners  gain  by  higher  prices  the  tenants  or 
ultimate  users,  who  must  pay  them,  are  deprived  of.  And 
all  this  value  which,  in  common  thought  and  speech,  in 
legislation  and  law,  is  undistinguished  from  wealth,  could, 
without  the  destruction  or  consumption  of  anything  more 
than  a  few  drops  of  ink  and  a  piece  of  paper,  be  utterly 
annihilated.  By  enactment  of  the  sovereign  political 
power  debts  might  be  canceled,  franchises  abolished  or 
taken  by  the  state,  slaves  emancipated,  and  land  returned 


278  THE  NATURE  OF  WEALTH.  Boole  II. 

to  the  general  usufructuary  ownership  of  the  whole  people, 
without  the  aggregate  wealth  being  diminished  by  the 
value  of  a  pinch  of  snuff,  for  what  some  would  lose  others 
would  gain.  There  would  be  no  more  destruction  of 
wealth  than  there  was  creation  of  wealth  when  Elizabeth 
Tudor  enriched  her  favorite  courtiers  by  the  grant  of 
monopolies  or  when  Boris  Godoonof  made  Russian  peas- 
ants merchantable  property. 

All  articles  of  wealth  have  value.  If  they  lose  value, 
they  cease  to  be  wealth.  But  all  things  having  value  are 
not  wealth,  as  is  erroneously  taught  in  current  economic 
works.*  Only  such  things  can  be  wealth  the  production 
of  which  increases  and  the  destruction  of  which  decreases 
the  aggregate  of  wealth.  If  we  consider  what  these  things 
are,  and  what  their  nature  is,  we  shall  have  no  difficulty  in 
denning  wealth. 

When  we  speak  of  a  community  increasing  in  wealth— 
as  when  we  say  that  England  has  increased  in  wealth  since 
the  accession  of  Victoria,  or  that  California  is  now  a 
wealthier  country  than  when  it  was  a  Mexican  territory— 
we  do  not  mean  to  say  that  there  is  more  land,  or  that  the 
natural  powers  of  the  land  are  greater,  for  the  land  is  the 
same  and  its  natural  powers  are  the  same.  Nor  yet  do 
we  mean  that  there  are  more  people  in  the  same  area,  for 
when  we  wish  to  express  that  idea  we  speak  of  increase  of 
population.  Nor  yet  do  we  mean  that  the  debts  or  dues 
owing  by  some  of  these  people  to  others  of  their  number 
have  increased.  But  we  mean  that  there  is  an  increase  of 
certain  tangible  things,  having  a  value  that  comes  from 
production,  such  as  buildings,  cattle,  tools,  machinery, 


*  See,  for  instance,  a  book  used  as  a  text-book  in  many  of  the 
American  and  English  colleges,  the  "  Political  Economy,"  by  Francis 
A.Walker,  third  edition,  New  York,  1888,  Sec.  7.  "Wealth  com- 
prises all  articles  of  value  and  nothing  else." 


Chap.XF.         WEALTH  IN  POLITICAL  ECONOMY.  279 

agricultural  and  mineral  products,  manufactured  goods, 
ships,  wagons,  furniture  and  the  like.  The  increase  of 
such  things  is  an  increase  of  wealth  j  their  decrease  is  a 
lessening  of  wealth  j  and  the  community  that,  in  propor- 
tion to  its  numbers,  has  most  of  such  things  is  the  wealthi- 
est community.  The  common  character  of  these  things  is 
that  of  natural  substances  or  products  which  have  been 
adapted  by  human  labor  to  the  satisfaction  of  human 
desire. 

Thus,  wealth,  as  alone  the  term  can  be  used  in  political 
economy,  consists  of  natural  products  that  have  been  se- 
cured, moved  or  combined,  so  as  to  fit  them  for  the  grati- 
fication of  human  desires.  It  is,  in  other  words,  labor 
impressed  upon  matter  in  such  a  way  as  to  store  up,  as  the 
heat  of  the  sun  is  stored  up  in  coal,  its  power  to  minister 
to  human  desires.  Nothing  that  nature  supplies  to  man 
without  the  expenditure  of  labor  is  wealth ;  nor  yet  does 
the  expenditure  of  labor  result  in  wealth  unless  there  is  a 
tangible  product  which  retains  the  power  of  ministering 
to  desire  j  nor  yet  again  can  man  himself,  nor  any  of  his 
powers,  capabilities  or  acquirements,  nor  any  obligation 
to  bestow  labor  or  yield  up  the  products  of  labor  from  one 
to  another,  constitute  any  part  of  wealth.  Nature  and 
man— or,  in  economic  terminology,  land  and  labor— are 
the  two  necessary  factors  in  the  production  of  wealth. 
Wealth  is  the  resultant  of  their  joint  action. 

And  though  Adam  Smith  nowhere  formally  defined 
wealth,  being  mainly  occupied  with  showing  that  it  did 
not  consist  exclusively  in  money  or  the  precious  metals ; 
and  though  incidentally  he  fell  into  confusion  in  regard 
to  it,  yet,  as  may  be  seen  from  the  passages  in  the  "  Wealth 
of  Nations"  before  quoted,*  this  was  his  idea  of  wealth 
when  he  came  to  look  at  it  directly— the  idea  of  products 

*  Page  28. 


280  THE  NATURE   OF  WEALTH.  Book  II. 

of  labor,  still  retaining  the  power,  impressed  on  them  by 
labor,  of  ministering  to  human  desire. 

Now  in  our  common  use  of  the  word  wealth  we  make 
no  distinction  between  the  various  kinds  of  things  that 
have  value,  as  to  the  origin  of  that  value,  but  class  them 
all  together  under  the  one  word,  wealth,  speaking  of  the 
sum  of  value  which  an  individual  may  have  at  his  com- 
mand as  his  wealth,  or  sometimes  as  his  money.  This 
metaphorical  use  of  words  is  so  embedded  in  common 
speech  that  it  would  be  hopeless  to  object  to  it  in  common 
usage. 

So  far  indeed  as  such  use  of  the  word  wealth  is  con- 
fined to  the  province  of  individual  economy,  the  relations 
of  man  to  man,  no  harm  whatever  results.  But  as  I  said 
in  the  introductory,  of  all  the  sciences,  political  economy  is 
that  which  comes  closest  to  the  thought  of  the  masses  of 
men.  All  men  living  in  society  have  some  sort  of  political 
economy,  even  though  they  do  not  recognize  it  by  that 
name ;  and  no  matter  how  much  they  may  profess  igno- 
rance, there  is  nothing  as  to  which  they  less  feel  ignorance. 
From  this  comes  a  danger  that  the  loose  use  of  a  word  in 
common  thought,  where  it  does  no  harm,  may  be  insensibly 
transferred  to  thought  on  economic  questions,-where  it  may 
do  great  harm. 

To  take  an  example :  Our  common  habit  of  estimating 
possessions  in  terms  of  money  does  no  harm  whatever,  so 
long  as  it  is  confined  to  the  sphere  of  individual  affairs,  in 
which  that  use  has  grown  up.  When,  sticking  strictly  to 
the  idea  of  the  individual,  we  speak  of  a  man  owning  or 
making  or  obtaining  so  much  money,  we  are  perfectly  well 
understood,  both  in  our  own  minds  and  by  others,  as 
meaning  not  really  money,  but  money's-worth.  Yet,  in 
passing  insensibly  into  the  field  of  political  economy,  this 
habit  of  speaking  of  money's-worth  as  money  gave  enor- 
mous strength  to  what  Adam  Smith  called  the  mercantile 


'Chap.  XV.        WEALTH  IN  POLITICAL  ECONOMY.  281 

system  of  political  economy,  or  what  is  now  called  the  pro- 
tective system— a  system  which  has  for  centuries  molded 
the  polity  of  nations  of  the  European  civilization,  and 
which,  though  now  more  than  a  hundred  years  after  the 
publication  of  the  "  Wealth  of  Nations,"  still  continues 
largely  to  mold  it.  Both  on  this  account  and  on  account 
of  other  delusions  which  have  taken  root  in  the  sphere  of 
economic  thought  from  the  habit  of  commonly  using  the 
word  money  as  synonymous  with  money's- worth,  it  is  to 
be  wished  there  were  some  word  or  phrase  in  common  use 
that  would  express  the  distinction  even  when  not  absolutely 
necessary,  between  actual  money  and  money's-worth. 

The  occasional  use  of  some  such  distinction  in  common 
speech  between  wealth  and  wealth's-worth  is  even  more 
to  be  wished  for.  There  is  more  danger  of  injurious  con- 
fusion from  the  insensible  transference  to  the  economic 
sphere  of  the  vague  uses  of  the  word  wealth  which 
suffice  for  the  individual  sphere  than  is  the  case  with  simi- 
lar common  uses  of  the  word  money.  And  although  the 
scholastic  political  economists  have  been  since  the  time 
of  Adam  Smith  largely  alive  to  the  confusions  introduced 
into  political  economy  by  treating  money  and  money's- 
worth  as  synonymous,  and  thus,  so  far  as  their  influence 
has  reached,  helped  to  guard  against  any  danger  from  the 
transference  of  the  common  use  of  the  word  money  to 
economic  thought .;  the  sanction  of  the  most  respectable 
colleges  and  universities  is  now  given  to  uses  of  the  eco- 
nomic term  wealth  in  a  way  that  only  conscious  metaphor 
permits  in  common  speech. 

Now  since  our  metaphorical  use  of  the  word  wealth  in 
the  sense  of  wealth's- worth  or  value  is  so  deeply  rooted,  it 
is  to  be  wished  that  in  common  speech,  or  at  least  wher- 
ever common  speech  tends  into  the  province  of  political 
economy,  as  it  continually  does,  we  should  distinguish 
between  true  wealth  and  metaphorical  or  representative 


282  THE  NATURE  OF  WEALTH.  Book  II. 

wealth,  by  the  use  of  such  words  as  "actual  wealth"* 
and  "  relative  wealth,"  meaning  by  the  one  that  which  is 
actually  wealth,  as  being  a  product  of  labor,  and  by  the 
other  that  which  is  not  in  itself  wealth,  although,  possess- 
ing value,  it  will  exchange  for  wealth.  Yet  this  would  be 
too  much  to  try,  and  I  think  all  may  be  had  that  it  is 
possible  to  gain  by  clearly  showing,  as  I  have  tried  to  do, 
that  there  are  two  kinds  of  value,  one  the  value  from  pro- 
duction that  adds  to  wealth,  and  the  other  the  value  from 
obligation  that  does  not. 

The  sum  of  wealth  in  civilized  society  consists  of  things 
of  many  different  kinds  having  the  common  character  of 
holding  in  store,  as  it  were,  the  ability  of  labor  to  minister 
to  desire.  Yet  there  is  in  English  no  single  word  which 
will  clearly  and  definitely  express  the  idea  of  an  article  of 
wealth,  nor  has  the  usage  of  economists  yet  fairly  adapted 
any  single  word  to  that  meaning  as  an  economic  term. 

The  word  "  commodity"  will  serve  in  many  cases.  But 
while  it  would  be  hard  to  speak  of  such  an  article  of 
wealth  as  a  railroad,  a  bridge,  a  massive  building,  or  the 
result  of  the  plowing  of  a  field  as  a  commodity,  there  are 
other  things,  usually  accounted  commodities,  since  they 
have  value  in  exchange,  that  are  not  properly  articles  of 
wealth— such  as  lands,  bonds,  mortgages,  franchises,  etc. 

The  word  "  goods "  as  commonly  used  also  comes  near 
to  the  idea  of  "  articles  of  wealth."  But  it  has  connota- 
tions if  not  limitations  which  make  its  meaning  too  narrow 
fully  to  express  the  idea.  And  even  if  these  were  set 
aside,  as  they  are  by  a  friend  of  mine,  the  wife  of  the 
superintendent  of  a  Western  zoological  garden,  who, 
coming  to  New  York  with  her  husband  on  the  annual  trip 


*  With  a  certain  justification  which  will  be  indicated  in  the  next 
chapter  the  lawyers  have  already  appropriated  the  term  "  real  estate," 
or  real  wealth,  to  what  is  in  greater  part  not  wealth  at  all. 


Chap.  XV.        WEALTH  IN  POLITICAL  ECONOMY.  283 

he  makes  to  buy  wild  animals,  jokingly  speaks  of  "  shop- 
ping for  menagerie  goods/'  there  would  still  remain  an 
insuperable  difficulty.  "  Goods/'  in  the  meaning  of  articles 
of  wealth,  has  in  English  no  singular,  and  it  is  impossible 
to  make  any,  because  the  singular  form  of  the  same  word 
already  holds  the  place  with  a  different  meaning.  While 
we  cannot  speak  of  "a  single  goods,"  still  less  can  we 
make  a  singular  by  dropping  the  "  s."  Even  though  usage 
should  confirm  our  speaking  of  the  stock  of  a  dealer  in 
wild  animals  as  goods,  it  would  be  to  destroy  the  well- 
established  use  of  the  word  to  speak  of  a  tiger,  a  hyena  or 
a  cobra-de-capello  as  "  a  good." 

In  its  most  general  use  "  good"  is  an  adjective,  express- 
ing a  quality  which  can  be  thought  of  only  as  an  attribute 
of  a  thing.  As  a  noun,  "  good  "  does  not  mean  a  tangible 
thing  at  all,  but  a  state  or  condition  or  quality  of  being. 
To  try  to  force  either  a  noun  of  accepted  meaning  or  an 
adjective  of  accepted  meaning  to  do  duty  as  the  singular 
of  a  noun  of  totally  different  meaning  is  to  injure  our  Eng- 
lish tongue,  both  as  a  vehicle  of  intelligible  speech  and  an 
instrument  of  precise  thought. 

To  what  confusions  of  thought  as  well  as  of  speech  the 
attempt  to  force  a  singular  of  the  word  "goods"  leads, 
may  be  seen  in  recent  university  text-books  of  political 
economy  „  such  as  that  of  Professor  Marshall  of  Cambridge 
University,  England.  Whoever  tries  to  discover  what  they 
mean  by  wealth  will  find  himself  struggling  with  a  jargon 
in  which  he  will  have  more  difficulty  in  recognizing  his 
mother  tongue  than  in  pigeon-English— a  jargon  of  such 
terms  as  "  material  goods  "  and  "  immaterial  goods,"  "  inter- 
nal goods  "  and  "  external  goods,"  "  free  goods  "  and  "  eco- 
nomic goods,"  " personal  goods"  and  "collective  goods," 
"  transferable  goods  "  and  "  non- transferable  goods,"  with 
occasional  bursts  of  such  thunderous  sound  as  "  external- 
material-transferable  goods,"  "  internal-non-transferable 


284  THE  NATURE  OF  WEALTH.  Book  1L 

goods/'  "material-external-non-transferable  goods"  and 
"personal-external-transferable  goods,"  with  all  their  re- 
spective singulars. 

There  is  in  English  no  singular  of  the  word  "goods," 
and  the  reason  is  that  there  is  no  need  for  one,  since  when 
we  want  to  express  the  idea  of  a  single  item  or  article  in  a 
lot  of  goods,  it  is  better  to  use  the  specific  noun,  and  to 
speak  of  a  needle  or  an  anchor,  a  ribbon  or  a  blanket,  as 
the  case  may  be  j  and  where  I  shall  have  occasion  to  speak 
of  a  single  item  of  wealth,  without  reference  to  kind,  or 
of  the  plural  forms  of  the  same  idea,  I  shall  speak  of  an 
article  or  of  articles  of  wealth. 


CHAPTER  XVI. 
THE   GENESIS  OF  WEALTH. 

SHOWING  HOW  WEALTH  ORIGINATES  AND  WHAT  IT 
ESSENTIALLY  IS. 

Reason  of  this  inquiry— Wealth  proceeds  from  exertion  prompted 
by  desire,  but  all  exertion  does  not  result  in  wealth — Simple  ex- 
amples of  action,  and  of  action  resulting  in  wealth—  "  Riding  and 
tying  "—Sub-divisions  of  effort  resulting  in  increments  of  wealth- 
Wealth  essentially  a  stored  and  transferable  service— Of  trans- 
ferable service— The  action  of  reason  as  natural,  though  not  as 
certain  and  quick  as  that  of  instinct — Wealth  is  service  impressed 
on  matter— Must  be  objective  and  have  tangible  form. 

IT  is  so  all-important  that  we  should  know  precisely  and 
certainly  just  what  the  chief  factor  of  political  econ- 
omy, wealth,  is,  so  that  we  may  hereafter  be  in  no  doubt 
whatever  about  it  but  may  confidently  reason  from  our 
knowledge  of  its  nature,  that  I  propose  to  reinforce  all  that 
has  been  said  by  showing  just  how  wealth  originates  and 
what  in  essence  it  actually  is. 

Wealth  is  a  result  of  human  exertion.  But  all  human 
exertion  does  not  result  in  wealth.  Not  merely  is  there 
failure  and  misadventure  in  the  application  of  effort  to 
the  production  of  wealth,  but  the  production  of  wealth  is 
not  the  only  purpose  of  human  effort. 

All  human  actions  proceed  from  desire  and  have  their 
aim  and  end  in  the  satisfaction  of  desire.  But  if  we  con- 

285 


286  THE  NATURE  OF  WEALTH.  Book  II. 

sider  those  actions  of  men  which  aim  at  material  satisfac- 
tions, we  see  that  there  is  a  distinction  as  to  the  way  in 
which  satisfaction  is  sought.  In  some  the  satisfaction 
sought  is  direct  and  immediate.  In  others  it  is  indirect 
and  delayed. 

To  put  myself  in  imagination  in  the  position  of  my  most 
remote  ancestor :  I  am  moved  by  the  desire  we  call  hunger 
or  appetite,  or  it  is  aroused  in  me  by  the  sight  of  a  tree 
laden  with  fruit.  I  pluck  and  eat  the  fruit,  and  am  satis- 
fied. Or  I  feel  the  desire  called  thirst,  and  stooping  down 
to  a  spring,  I  drink,  and  am  again  satisfied.  Action  and 
satisfaction  are  in  such  cases  confined  to  the  same  person, 
and  the  connection  between  them  is  direct  and  immediate. 

Or,  my  wife  is  with  me.  She  feels  the  same  desires ; 
but  is  not  tall  enough  to  pluck  the  fruit  and  cannot  as 
well  climb  a  tree  or  so  readily  stoop  to  the  spring.  So, 
impelled  by  that  primordial  impulse  that  ordains  that  the 
desire  of  the  man  shall  be  to  the  woman  no  less  than  the 
desire  of  the  woman  to  the  man,  I  pluck  fruit  that  she  may 
eat,  and  hollowing  my  hands  give  her  to  drink.  In  this 
case  the  action  is  on  the  part  of  one  person ;  the  satisfaction 
proceeding  from  the  action  is  obtained  by  another.*  This 
transfer  of  the  direct  result  of  action  we  speak  of  as  a  ser- 
vice rendered  and  received.  But  the  connection  between 
action  and  satisfaction  is  still  direct  and  immediate,  the 
causal  relation  between  the  two  having  no  intermediate 
link. 

These  two  examples  are  types  of  the  ways  in  which 
many  of  our  actions  attain  satisfaction.  These  are  the 
ways  in  which  in  nearly  all  cases  the  animals  satisfy  their 
desires.  If  we  except  the  storing  and  hiving  animals,  and 

*  There  is  of  course  on  my  part  both  a  desire  and  a  satisfaction— 
a  desire  that  her  desires  may  be  satisfied  and  a  satisfaction  when  they 
are  satisfied.  But  these  are  secondary,  the  primary  end  and  aim  of 
my  action  being  the  satisfaction  of  her  desires. 


Chap.  XVI.  THE  GENESIS  OF  WEALTH. 

the  almost  accidental  cases  in  which  a  predatory  animal 
kills  a  victim  too  large  to  be  consumed  at  once,  there  is 
nothing  in  their  actions  which  goes  beyond  the  direct 
and  immediate  satisfaction  of  desire.  The  cow  that  has 
browsed  all  day  or  the  bird  that  has  brought  worms  to 
her  young  has  done  nothing  towards  the  satisfaction  of 
desire  that  will  recur  to-morrow. 

In  such  cases  there  is  no  suggestion  of  anything  we 
would  call  wealth.  And  in  a  world  where  all  human  de- 
sires were  satisfied  in  this  direct  and  immediate  way  there 
would  be  no  wealth,  no  matter  how  great  the  activities  of 
man  or  how  abundant  the  spontaneous  offerings  of  nature 
for  the  satisfaction  of  his  desires. 

But  man  is  a  reasoning  being,  who  looks  beyond  the 
immediate  promptings  of  desire,  and  who  adapts  means 
to  ends.  An  animal  would  merely  eat  of  the  fruit  or 
drink  of  the  spring  to  the  full  satisfaction  of  present  de- 
sire. But  the  man  bethinking  himself  of  the  recurrence 
of  desire  might,  after  satisfying  his  immediate  desire, 
carry  off  with  him  some  of  the  fruit  to  insure  a  like  satis- 
faction on  the  morrow,  or  with  a  still  longer  prevision  plant 
its  kernel  with  a  view  to  satisfaction  in  future  years.  Or 
with  a  view  to  the  future  satisfaction  of  thirst,  he  might 
enlarge  the  spring  or  scoop  out  a  vessel  in  which  to  carry 
water,  or  dig  a  channel  or  construct  a  pipe.  In  such  cases 
action  would  be  spent  not  in  the  direct  and  immediate 
satisfaction  of  desire,  but  in  the  doing  of  what  might  in- 
directly and  in  the  future  aid  in  satisfying  desire. 

In  these  cases  is  something  which  did  not  exist  in  the 
previous  cases,  and  which,  save  among  the  storing  animals, 
has  nothing  analogous  to  it  in  animal  life.*  This  something 
is  wealth.  It  consists  of  natural  substances  or  products, 
so  changed  in  place,  form  or  combination  by  the  exertion 

*  Page  15. 


288  THE  NATURE   OF   WEALTH.  Book  II. 

of  human  labor  as  better  to  fit  them  for  the  satisfaction 
of  human  desires. 

The  essential  character  of  wealth  is  that  of  the  embodi- 
ment or  storage  in  material  form  of  action  aiming  at  the 
satisfaction  of  desire,  so  that  this  action  obtains  a  certain 
permanence— a  capability  of  remaining  for  a  time  as  at 
a  stopping-place,  whence  it  may  be  taken,  either  to  yield 
satisfaction  to  desire,  or  to  be  carried  forward  towards  the 
satisfaction  of  desire  requiring  yet  more  effort. 

Where  two  men  wishing  to  travel  over  a  determined 
road  have  between  them  but  one  horse,  they  frequently 
"  ride  and  tie."  That  is,  John  rides  forward  for  a  certain 
space,  leaving  Jim  to  follow  on  foot.  He  then  ties  the 
horse,  pushing  forward  himself  on  foot.  When  Jim  comes 
up,  he  unties  the  horse,  and  in  his  turn  rides  forward  for 
some  distance  past  John,  and  then  tying  the  horse  again 
for  John  to  take,  pushes  forward.  And  so  on  to  the 
journey's  end.  In  this  tying  of  the  horse,  so  that  he  may 
be  taken  and  ridden  forward  again,  is  something  analogous 
to  the  way  in  which  effort  towards  the  satisfaction  of  desire 
is  fixed  or  tied  up  in  wealth,  from  which  it  may  be  taken 
for  the  gratification  of  desire,  or  for  the  purpose  of  being 
carried  forward  by  additional  effort  to  a  point  where  it 
may  serve  to  gratify  desires  requiring  larger  effort. 

Thus,  for  the  satisfaction  of  desire  by  the  eating  of  bread, 
effort  must  first  be  expended  to  grow  the  grain ;  then  to 
harvest  it  j  then  to  grind  it  into  flour ;  then  to  bake  the 
flour  into  bread.  At  each  of  these  stages  (and  they  may 
be  sub-divided)  there  is  an  increment  of  wealth :  that  is  to 
say,  some  part  of  the  effort  required  to  reach  the  point  of 
yielding  the  final  satisfaction  has  been  accomplished,  and 
is  tied  or  stored  in  concrete  form,  so  that  what  has  been 
gained  towards  the  final  result  may  be  utilized  in  the  re- 
maining stages  of  the  process.  Grain  is  an  article  of  wealth 
expressing  the  effort  necessary  in  growing  and  harvesting, 


Chap.  XVI.  THE  GENESIS  OF  WEALTH.  289 

in  such  form  that  it  may  be  from  thence  carried  forward 
to  the  satisfaction  of  desire,  either  by  feeding  it  to  do- 
mestic animals,  converting  it  into  starch  or  alcohol,  etc., 
or  by  turning  it  into  flour  and  making  bread.  Flour  again 
is  an  article  of  wealth  embodying  the  effort  necessary  to 
the  production  of  grain  and  the  further  effort  required  in 
grinding  j  and  bread  an  article  of  wealth  embodying  that 
and  the  additional  effort  required  in  baking,  in  a  form  in 
which  consumption  (in  this  case  eating)  will  give  the  satis- 
faction to  desire  of  which  bread  is  capable. 

The  idea  of  wealth  cannot  be  reduced  to  that  of  satisfac- 
tion, since,  even  when  the  intent  and  the  result  of  the  effort 
is  the  satisfaction  of  a  desire  on  the  part  of  the  expender 
of  the  effort,  there  is  necessarily  an  intermediate  step,  in 
which  the  expended  effort  pauses  or  is  stored  up  for  an 
interval  in  concrete  form,  and  whence  it  may  be  released 
not  merely  to  satisfy  the  desire  of  the  expender  of  the 
effort,  but  that  of  another  as  well.  If  I  pluck  fruit  to-day 
for  the  satisfaction  of  to-morrow's  appetite,  the  satisfaction 
I  then  obtain  when  eating  it  would  not  be  to  me  then  the 
direct  result  of  an  effort,  but  would  yield  me  satisfaction 
as  the  result  of  a  service— a  service  of  which  I  myself 
would  be  the  direct  beneficiary,  but  still  no  less  truly  a 
service  than  it  would  be  in  the  case  of  my  wife  were  she 
the  recipient  of  the  satisfaction  obtained  by  eating  it. 

Thus  if  we  wish  to  bring  the  idea  of  wealth  into  a  larger 
generalization,  the  term  of  widest  inclusiveness  that  we 
could  select  would  be  a  word  which  would  express  the  idea 
of  service  without  limitation  as  to  mode.  The  essential 
idea  of  wealth  is  really  that  of  service  embodied  in  material 
form,  and  all  our  enjoying  of  wealth,  or  exchanging  of 
wealth,  or  giving  of  wealth,  or  obtaining  of  wealth,  is 
really  at  bottom  the  enjoying  or  exchanging  or  giving 
or  obtaining  of  service,  a  word  which  involves  the  possi- 
bility of  distinction  in  person  between  the  exertor  of 


290  THE  NATURE  OF  WEALTH.  Book  II. 

effort  and  the  recipient  of  the  final  satisfaction,  which  is 
its  aim. 

Service  of  some  sort  is  essential  to  life,  as  it  may  well  be 
doubted  if  even  in  what  the  microscope  may  show  us  of 
the  lowest  rounds  of  life's  ladder  there  is  anything  that 
comes  into  life  and  maintains  life  self-contained  and  self- 
sufficing. 

But  the  first  and  simplest  form  of  service,  that  in  which 
the  recipient  gets  directly  the  satisfaction  brought  about 
by  the  action  (and  to  which  for  the  sake  of  distinction  the 
term  service  should  be  reserved),  though  it  is  capable  of 
being  given,  received  and  exchanged,  is  so  capable  only 
within  very  narrow  limits,  since  the  action  is  spent  in  such 
direct  service  and  is  over  and  done,  whereas  in  action  re- 
sulting in  wealth  the  action  is  not  spent,  but  is  stored  or 
tied  in  intermediate  and  material  form,  to  be  spent  in 
gratification  when  required.  In  direct  service  the  power 
of  human  action  to  satisfy  human  desire  is  like  the  exer- 
tion of  the  power  of  electricity  in  the  lightning-flash  or 
the  spark  of  the  Leyden  jar.  But  in  indirect  service, 
through  the  medium  of  wealth,  the  action  remains  unused 
for  a  time  in  readily  exchangeable  form,  whence  it  may  be 
called  forth  for  use,  as  the  power  of  electricity  remains  in 
transportable  and  exchangeable  form  in  the  storage  bat- 
tery. So  narrow  indeed  are  the  limits  to  the  exchange  of 
direct  service  for  direct  service  that  though  this  sometimes 
takes  place  even  in  our  highest  civilization,  it  is  clear  that 
were  it  the  only  mode  in  which  the  action  of  one  person 
could  be  used  in  procuring  satisfaction  to  another,  nothing 
like  what  we  call  civilization  could  exist,  nor  indeed  do  I 
think  that  human  life,  in  any  stage  in  which  we  know  it, 
could  continue. 

I  may  black  your  boots  with  the  understanding  that  you 
shall  in  return  shave  my  face,  or  gratify  you  by  telling  a 
story  on  condition  that  you  shall  gratify  me  by  singing  a 


Chap.  XVI.  THE  GENESIS  OF  WEALTH.  291 

song,  and  the  possibilities  of  such  exchange  may  be  some- 
what widened  by  the  understanding  that  though  I  black 
your  boots  or  tell  you  the  story  to-day,  you  may  give  me 
the  shave  or  sing  the  song  at  a  future  time,  and  do  this 
either  for  me  or  for  any  one  whom  I  may  present  to  re- 
ceive in  my  place  the  promised  service.  But  manifestly 
the  exchange  of  services  that  may  take  place  in  that  way 
is  as  nothing  compared  with  the  exchange  that  becomes 
possible  when  service  is  embodied  in  concrete  form  in 
wealth  and  may  be  passed  from  hand  to  hand  and  used 
at  will  in  the  satisfaction  of  desire. 

By  this  transmutation  of  labor  into  wealth  the  exchange 
even  of  such  services  as  cannot  be  transmuted  into  wealth, 
since  they  must  be  rendered  directly  to  the  person,  is 
much  facilitated.  I  desire,  for  instance,  such  service  from 
another  as  the  carrying  of  a  bag  or  message,  or  the  con- 
veyance of  myself  and  luggage  from  one  place  to  another 
by  cab,  or  stage,  or  train.  There  is  no  equivalent  service  on 
my  part  desired  by  those  for  whose  services  I  wish,  nor  if 
there  was  could  I  stop  to  render  it ;  but  by  the  interven- 
tion of  wealth  the  satisfaction  of  desire  on  both  sides  be- 
comes possible,  and  the  exchange  is  completed  there  and 
then  j  those  from  whom  I  obtain  the  service  receiving  from 
me  some  article  of  wealth  or  representative  of  wealth  which 
they  can  in  turn  exchange  either  for  wealth  or  for  direct 
services  from  others.  It  is  thus,  and  only  thus,  that  the 
great  bod}r  of  exchanges  of  direct  services  that  take  place 
in  civilization  becomes  possible.  Indeed,  without  wealth  it 
is  difficult  to  see  how  men  could  avail  themselves  of  one 
another's  powers  to  a  much  greater  extent  than  do  the 
animals ;  for  that  some  animals  exchange  services,  whoever 
has  watched  monkeys  reciprocally  ridding  each  other  of 
fleas  must  have  realized.  Wealth  is  produced  by  man  and 
consequently  there  could  be  no  wealth  in  the  world  until 
after  man  came,  just  as  bees  must  have  preceded  the  honey 


292  THE  NATURE  OF  WEALTH.  Book  II. 

which  they  make.  But  though  man  has  no  wealth-making 
instinct  as  the  bees  have  a  honey-making  instinct,  yet 
reason  supplies  its  place,  and  man  produces  wealth  just  as 
naturally  and  certainly  as  the  bees  make  honey— so  natu- 
rally and  so  certainly  that  save  in  unnatural  and  temporary 
conditions,  men  destitute  of  all  forms  of  wealth  have  never 
been  found. 

The  essential  idea  of  wealth  being  that  of  exertion  im- 
pressed on  matter,  or  the  power  of  rendering  service  stored 
in  concrete  form,  to  talk  of  immaterial  wealth  as  some 
professed  economists  now  talk,  is  as  much  a  contradiction 
in  terms  as  it  would  be  to  talk  of  square  circles  or  triangu- 
lar squares.  Nothing  can  be  really  an  object  of  wealth 
that  is  not  tangible  to  the  senses.  Nor  in  the  strict  sense 
of  the  term,  can  wealth  include  any  natural  substance,  or 
form,  or  power,  unmodified  by  man's  exertion,  nor  any 
human  power  or  capacity  of  exertion.  To  talk  of  natural 
wealth,  or  to  talk  of  human  skill,  knowledge  or  energy  as 
included  in  wealth  is  also  a  contradiction  in  terms. 


CHAPTER  XVII. 
THE  WEALTH  THAT  IS  CALLED  CAPITAL. 

SHOWING  WHAT  THE  WEALTH  CALLED  CAPITAL  REALLY  IS. 

Capital  is  a  part  of  wealth  used  indirectly  to  satisfy  desire— Simple 
illustration  of  fruit— Wealth  permits  storage  of  labor— The  bull 
and  the  man— Exertion  and  its  higher  powers— Personal  qualities 
cannot  really  be  wealth  or  capital— The  taboo  and  its  modern 
form — Common  opinion  of  wealth  and  capital. 

AS  we  have  seen,  all  wealth  is  not  devoted  in  consump- 
J\_  tion  to  the  satisfaction  of  desire.  Much  of  it  is  de- 
voted to  the  production  of  other  forms  of  wealth.  That 
part  of  wealth  so  devoted  to  the  production  of  other  wealth 
is  what  is  properly  called  capital. 

Capital  is  not  a  different  thing  from  wealth.  It  is  but 
a  part  of  wealth,  differing  from  other  wealth  only  in  its 
use,  which  is  not  directly  to  satisfy  desire,  but  indirectly 
to  satisfy  desire,  by  associating  in  the  production  of  other 
wealth. 

I  have  spoken  of  wealth  as  the  concrete  result,  the  tan- 
gible embodiment,  by  change  wrought  in  material  things, 
of  labor  exerted  towards  the  satisfaction  of  desire,  without 
as  yet  having  reached  or  completely  reached  the  point  of 
satisfaction,  consumption. 

Now,  if  this  concrete  result  of  labor,  wealth,  be  used, 
not  in  directly  satisfying  desire  by  consumption,  but  for 
the  purpose  of  obtaining  more  wealth,  it  becomes  in  that 

293 


294  THE  NATURE  OF  WEALTH.  BooTcIL 

use  what  we  term  capital.  It  is  wealth,  devoted  not  to  the 
final  use  of  wealth,  the  satisfaction  of  desires,  but  turned 
aside,  as  it  were,  to  pass  through  another  stage,  by  which 
more  wealth  may  be  secured  and  the  final  possibilities  of 
satisfaction  increased. 

To  return  to  the  simplest  illustration  given  in  the  chap- 
ter treating  of  wealth :  The  man  who,  finding  a  fruit-tree, 
plucks  and  eats,  spends  his  labor  in  the  most  direct  and 
primitive  form,  that  of  satisfying  desire.  His  desire  is  for 
the  moment  satisfied,  but  the  labor  he  has  exerted  is  all 
spent;  no  result  remains  which  will  help  to  the  future 
satisfaction  of  desire. 

But  if  not  content  with  the  satisfaction  of  present  desire 
he  carries  off  some  of  the  fruit  to  where  he  may  in  the 
future  more  conveniently  obtain  it,  he  has  in  this  gathered 
fruit  a  concrete  result  of  the  expenditure  of  labor.  His 
labor  expended  in  the  gathering  and  removal  of  the  fruit 
which  he  retains  has  been  as  it  were  stored  up,  as  energy 
may  be  stored  up  by  bending  a  bow  or  raising  a  stone,  to 
be  utilized  again  at  a  future  time.  This  stored-up  labor, 
concretely  in  this  case— this  gathered  and  transported  fruit, 
is  wealth,  and  will  retain  this  character  of  wealth  or  stored- 
up  labor,  until  it  is  (1)  consumed,  by  being  applied  to  the 
gratification  of  desire ;  or  (2)  destroyed,  as  by  decay,  the 
ravages  of  insects  or  animals,  or  some  other  change  which 
takes  away  its  potency  of  aiding  in  the  satisfaction  of 
desire. 

But  the  man  who  has  thus  obtained  the  possession  of 
wealth  by  gathering  fruit  and  carrying  it  to  a  more  con- 
venient place  may  utilize  its  potency  of  ministering  to 
desire  in  different  ways.  Let  us  suppose  him  to  divide 
this  wealth,  this  gathered  fruit,  into  three  portions.  One 
portion  he  will  eat  as  he  feels  desire ;  another  portion  he 
will  give  to  some  other  man  in  exchange  for  some  other 
form  of  wealth ;  and  the  third  portion  he  will  plant  in  order 


Cliap.  XVII.     WEALTH  THAT  IS  CALLED  CAPITAL.        295 

that  in  the  future  he  may  more  readily  and  more  abun- 
dantly satisfy  his  desire  for  such  fruit. 

All  three  of  these  portions  are  alike  wealth.  But  the 
first  portion  is  merely  wealth ;  its  use  is  the  final  use  of 
all  wealth— the  satisfaction  of  desire.  But  the  second  and 
third  portions  are  not  simply  wealth— they  are  capital ; 
their  use  is  in  obtaining  more  or  other  wealth,  which  in  its 
turn  may  be  used  for  the  satisfaction  of  desire. 

In  other  words,  all  capital  is  wealth;  but  all  wealth  is 
not  capital.  Capital  is  wealth  applied  to  the  production 
of  more  or  other  wealth.  It  is  stored  labor,  not  applied 
by  one  further  step  to  the  ultimate  end  and  aim  of  all 
labor,  the  satisfaction  of  desire ;  but  in  the  production  of 
more  wealth  to  the  further  storage  of  labor. 

By  the  storage  of  labor,  which  is  involved  in  the  pro- 
duction of  wealth,  it  becomes  possible  for  man  to  change 
the  time  in  which  a  given  exertion  shall  be  utilized  in  the 
satisfaction  of  desire,  thus  greatly  increasing  the  sum  of 
satisfactions  which  given  exertion  may  procure.  And  by 
the  using  of  wealth  as  capital,  which  is  the  calling  of  past 
exertion  to  the  service  of  present  exertion,  he  is  enabled 
to  concentrate  exertion  upon  a  given  point,  at  a  given  time, 
and  to  call  in,  as  it  were  by  the  way,  forces  of  nature  which 
far  transcend  in  their  power  those  which  nature  has  put 
at  his  use  in  the  human  frame. 

To  illustrate :  Nature  gives  to  the  bull  in  his  massive 
skull  and  sharp  horns  a  weapon  of  offense  by  which  almost 
the  whole  strength  of  his  frame  may  be  concentrated  upon 
one  or  two  narrow  points,  thus  utilizing  the  maximum  of 
force  upon  the  minimum  of  resistance.  She  has  given  to 
man  no  such  weapon,  for  his  clenched  fist,  the  nearest 
approach  to  the  horns  of  the  bull  his  bodily  resources 
furnish,  is  a  far  inferior  weapon.  But  by  turning  his 
labor  into  capital  in  the  shape  of  a  spear  he  is  enabled  on 
occasion  to  concentrate  nearly  the  whole  force  of  his  body 


296  THE  NATURE  OF  WEALTH.  Book IL 

upon  an  even  narrower  point  than  can  the  bull  j  and  by 
turning  labor  into  capital  in  the  form  of  a  bow  or  crossbow 
or  sling,  he  may  exert  in  one  instant  the  force  that  can  be 
accumulated  during  longer  intervals  of  time  j  and  finally, 
as  the  result  of  many  transmutations  of  labor  into  capital, 
he  can  exert  in  the  rifle  chemical  forces  more  potent  than 
any  of  the  forces  of  which  the  energies  of  his  own  body 
give  him  command. 

Wealth,  in  short,  is  labor,  which  is  raised  to  a  higher  or 
second  power,  by  being  stored  in  concrete  forms  which 
give  it  a  certain  measure  of  permanence,  and  thus  permit 
of  its  utilization  to  satisfy  desire  in  other  times  or  other 
places.  Capital  is  stored  labor  raised  to  a  still  higher  or 
third  power  by  being  used  to  aid  labor  in  the  production 
of  fresh  wealth  or  of  larger  direct  satisfactions  of  desire. 

It  is  likewise  to  be  observed  that  capital  being  a  form 
of  wealth— that  is  to  say,  wealth  used  for  the  purpose  of 
aiding  labor  in  the  production  of  more  wealth  or  greater 
satisfactions— nothing  can  be  capital  that  is  not  wealth, 
and  the  term  capital  is  subject  to  all  the  restrictions  and 
limitations  that  apply  to  the  term  wealth.  Personal 
qualities  such  as  knowledge,  skill,  industry,  are  qualities 
of  labor  and  can  never  be  properly  treated  as  capital. 
While  in  common  speech  it  may  be  permissible  to  speak  in 
a  metaphorical  sense  of  such  qualities  as  capital,  meaning 
thereby  that  they  are  susceptible  of  yielding  to  their  pos- 
sessors advantages  akin  to  the  advantages  given  by  capital, 
yet  to  transfer  this  metaphorical  use  of  speech  to  eco- 
nomic reasoning  is,  as  many  ponderous  treatises  will 
testify,  provocative  of  fundamental  confusion. 

And  so,  while  the  possession  of  slaves,  of  special  privi- 
leges, of  public  debts,  of  mortgages,  or  promissory  notes, 
or  other  things  of  the  kind  I  have  spoken  of  in  treating 
of  spurious  wealth,  may  in  the  hands  of  the  individual 
possessor  be  equivalent  to  the  possession  of  capital,  they 


Chap.  XVIL      WEALTH  THAT  IS  CALLED  CAPITAL.        297 

can  constitute  no  part  of  real  capital.  All  the  public  debts 
of  the  world  do  not  add  in  the  slightest  degree  to  the  capi- 
tal of  the  world— are  incapable  of  aiding  by  one  iota  in  the 
production  of  wealth;  while  the  greater  part  of  what 
figures  in  our  official  reports  as  capital  invested  in  rail- 
roads, etc.,  is  in  reality  nothing  but  the  inflation  of  expec- 
tation. Capital  in  the  economic  sense  is  a  tangible,  material 
thing— matter  changed  in  place,  form  or  condition,  so  as 
to  fit  it  for  human  uses,  and  applied  to  aiding  labor  in  the 
production  of  wealth  or  direct  satisfactions. 

To  recur  to  our  first  simple  illustration :  A  high  chief 
of  the  Hawaiian  Islands  in  the  old  heathen  days  might,  on 
discovering  a  tree  laden  with  fruit,  have  eaten  his  fill  and 
then  laid  the  tree  under  taboo.  He  might  thus  have  ob- 
tained for  himself  something  of  the  same  advantages  that 
he  would  have  obtained  by  carrying  some  of  the  fruit  to 
a  more  convenient  place,  for  the  inhibition  upon  others 
might  have  led  some  of  them,  in  return  for  tHe  privilege 
of  taking  it,  to  consent  to  bring  him  some.  But  the  result 
would  not  have  been  the  same  to  the  community  as  a 
whole.  His  Laziness  could  have  obtained  the  fruits  of 
labor,  but  only  by  virtually  taking  the  labor  of  others. 

And  so  the  son  of  an  Hawaiian  missionary,  who  in  the 
legal  ownership  of  land  holds  the  Christian  equivalent  of 
the  old  heathen  power  of  taboo,  may  in  return  for  the 
privilege  of  permitting  others  to  apply  labor  to  his  land 
compel  them  to  bring  him  wealth  or  capital.  The  posses- 
sion of  this  power  so  far  as  he  himself  is  concerned  is 
equivalent  to  the  possession  of  wealth  or  capital,  but  not 
so  to  the  community.  It  implies  110  addition  to  the  sum 
of  production  or  to  the  power  of  future  production.  It 
implies  merely  a  power  of  affecting  the  distribution  of 
what  may  already  by  other  agencies  be  produced. 

This  fact  that  part  of  what  is  really  wealth  is  capital, 
and  that  what  is  not  wealth  is  not  capital,  is  so  clear  that 


298  THE  NATURE  OF  WEALTH.  Book  II. 

it  is  really  recognized  in  ordinary  speech  if  we  pay  atten- 
tion to  the  core,  or  original  meaning  of  the  words.  As  I 
say  in  "  Progress  and  Poverty,"  when  speaking  of  capital 
(Book  L,  Chapter  IL,  "The  Meaning  of  the  Terms") : 

If  the  articles  of  actual  wealth  existing  at  a  given  time  in  a  given 
community  were  presented  in  situ  to  a  dozen  intelligent  men  who  had 
never  read  a  line  of  political  economy,  it  is  doubtful  if  they  would 
differ  in  respect  to  a  single  item,  as  to  whether  it  should  be  accounted 
capital  or  not.  Money  which  its  owner  holds  for  use  in  his  business 
or  in  speculation  would  be  accounted  capital;  money  set  aside  for 
household  or  personal  expenses  would  not.  That  part  of  a  farmer's 
crop  held  for  sale  or  for  seed,  or  to  feed  his  help  in  part  payment  of 
wages,  would  be  accounted  capital ;  that  held  for  the  use  of  his  own 
family  would  not  be.  The  horses  and  carriage  of  a  hackman  would 
be  classed  as  capital ;  but  an  equipage  kept  for  the  pleasure  of  its 
owner  would  not.  So,  no  one  would  think  of  counting  as  capital 
the  false  hair  on  the  head  of  a  woman,  the  cigar  in  the  mouth  of  a 
smoker,  or  the  toy  with  which  a  child  is  playing ;  but  the  stock  of  a 
hair-dealer,  of  a  tobacconist,  or  the  keeper  of  a  toy-store,  would  be 
unhesitatingly  set  down  as  capital.  A  coat  which  a  tailor  had  made 
for  sale  would  be  accounted  capital ;  but  not  the  coat  he  had  made 
for  himself.  Food  in  the  possession  of  a  hotel-keeper  or  a  restaura- 
teur would  be  accounted  capital ;  but  not  the  food  in  the  pantry  of  a 
housewife,  or  in  the  lunch-basket  of  a  workman.  Pig-iron  in  the 
hands  of  the  smelter,  or  founder,  or  dealer,  would  be  accounted  capi- 
tal ;  but  not  the  pig-iron  used  as  ballast  in  the  hold  of  a  yacht.  The 
bellows  of  a  blacksmith,  the  looms  of  a  factory,  would  be  capital ;  but 
not  the  sewing-machine  of  a  woman  who  does  only  her  own  work ;  a 
building  let  for  hire,  or  used  for  business  or  productive  purposes ; 
but  not  a  homestead.  In  short,  I  think  we  should  find  that  now,  as 
when  Dr.  Adam  Smith  wrote,  "  that  part  of  a  man's  stock  which  he 
expects  to  yield  him  a  revenue  is  called  his  capital."  And,  omitting 
his  unfortunate  slip  as  to  personal  qualities,  and  qualifying  some- 
what his  enumeration  of  money,  it  is  doubtful  if  we  could  better  list 
the  different  articles  of  capital  than  did  Adam  Smith  in  the  passage 
which  in  the  previous  part  of  this  chapter  I  have  condensed. 

Now,  if,  after  having  thus  separated  the  wealth  that  is  capital 
from  the  wealth  that  is  not  capital,  we  look  for  the  distinction 
between  the  two  classes,  we  shall  not  find  it  to  be  as  to  the  charac- 
ter, capabilities,  or  final  destination  of  the  things  themselves,  as  has 
been  vainly  attempted  to  draw  it,  but  it  seems  to  me  that  we  shall 


Chap.  AT/I.      WEALTH  THAT  IS  CALLED  CAPITAL.        299 

find  it  to  be  as  to  whether  they  are  or  are  not  in  the  possession  of  the 
consumer.*  Such  articles  of  wealth  as  in  themselves,  in  their  uses, 
or  in  their  products,  are  yet  to  be  exchanged  are  capital ;  such  articles 
of  wealth  as  are  in  the  hands  of  the  consumer  are  not  capital.  Hence, 
if  we  define  capital  as  icealtli  in  course  of  exchange,  understanding 
exchange  to  include,  not  merely  the  passing  from  hand  to  hand,  but 
also  such  transmutations  as  occur  when  the  reproductive  or  trans- 
forming forces  of  nature  are  utilized  for  the  increase  of  wealth,  we 
shall,  I  think,  comprehend  all  the  things  that  the  general  idea  of 
capital  properly  includes,  and  shut  out  all  it  does  not.  Under  this 
definition,  it  seems  to  me,  for  instance,  will  fall  all  such  tools  as  are 
really  capital.  For  it  is  as  to  whether  its  services  or  uses  are  to  be 
exchanged  or  not  which  makes  a  tool  an  article  of  capital ;  or  merely 
an  article  of  wealth.  Thus  the  lathe  of  a  manufacturer  used  in 
making  things  which  are  to  be  exchanged  is  capital ;  while  the  lathe 
kept  by  a  gentleman  is  not.  Thus  wealth  used  in  the  construction 
of  a  railroad,  a  public  telegraph  line,  a  stage-coach,  a  theater,  a 
hotel,  etc.,  may  be  said  to  be  placed  in  the  course  of  exchange.  The 
exchange  is  not  effected  all  at  once,  but  little  by  little,  with  an 
indefinite  number  of  people.  Yet  there  is  an  exchange,  and  the 
"consumers"  of  the  railroad,  the  telegraph  line,  the  stage-coach, 
theater  or  hotel,  are  not  the  owners,  but  the  persons  who  from  time 
to  time  use  them. 

Nor  is  this  definition  inconsistent  with  the  idea  that  capital  is  that 
part  of  wealth  devoted  to  production.  It  is  too  narrow  an  under- 
standing of  production  which  confines  it  merely  to  the  making  of 
things.  Production  includes  not  merely  the  making  of  things,  but 
the  bringing  of  them  to  the  consumer.  The  merchant  or  storekeeper 
is  thus  as  truly  a  producer  as  is  the  manufacturer  or  farmer,  and  his 
stock  or  capital  is  as  much  devoted  to  production  as  is  theirs.  But 
it  is  not  worth  while  now  to  dwell  upon  the  functions  of  capital, 
which  we  shall  be  better  able  to  determine  hereafter.  Nor  is  the 

*  Money  may  be  said  to  be  in  the  hands  of  the  consumer  when  de- 
voted_to  the  procurement  of  gratification,  as,  though  not  in  itself  de- 
voted to  consumption,  it  represents  wealth  which  is ;  and  thus  what 
in  the  previous  paragraph  I  have  given  as  the  common  classification 
would  be  covered  by  this  distinction,  and  would  be  substantially 
correct.  In  speaking  of  money,  in  this  connection,  I  am,  of  course, 
speaking  of  coin,  for  although  paper  money  may  perform  all  the 
functions  of  coin  it  is  not  wealth,  and  cannot  therefore  be  capital.  — 
["Progress  and  Poverty,"  Book  L,  Chapter  II.] 


300  THE  NATURE  OF  WEALTH.  Book  II. 

definition  of  capital  I  have  suggested  of  any  importance.  I  am  not 
writing  a  text-book,  but  only  attempting  to  discover  the  laws  which 
control  a  great  social  problem,  and  if  the  reader  has  been  led  to  form 
a  clear  idea  of  what  things  are  meant  when  we  speak  of  capital  my 
purpose  is  served. 

But  before  closing  this  digression  let  me  call  attention  to  what  is 
of  ten  forgotten— namely,  that  the  terms  "wealth,"  "capital,"  "wages," 
and  the  like,  as  used  in  political  economy,  are  abstract  terms  and  that 
nothing  can  be  generally  affirmed  or  denied  of  them  that  cannot  be 
affirmed  or  denied  of  the  whole  class  of  things  they  represent.  The 
failure  to  bear  this  in  mind  has  led  to  much  confusion  of  thought, 
and  permits  fallacies,  otherwise  transparent,  to  pass  for  obvious 
truths.  Wealth  being  an  abstract  term,  the  idea  of  wealth,  it  must 
be  remembered,  involves  the  idea  of  exchangeability.  The  posses- 
sion of  wealth  to  a  certain  amount  is  potentially  the  possession  of 
any  or  all  species  of  wealth  to  that  equivalent  in  exchange.  And 
consequently,  so  of  capital. 


CHAPTER  XVIII. 

WHY  POLITICAL  ECONOMY  CONSIDERS 
ONLY  WEALTH. 

SHOWING  THAT  POLITICAL  ECONOMY,  AS  PROPERLY  STATED, 
COVERS  ALL  THE  RELATIONS  OF  MEN  IN  SOCIETY  INTO 
WHICH  IT  IS  NECESSARY  TO  INQUIRE. 

Political  economy  does  not  include  all  the  exertions  for  the  satis- 
faction of  material  desires ;  but  it  does  include  the  greater  part  of 
them,  and  it  is  through  value  that  the  exchange  of  services  for 
services  is  made — Its  duty  and  province. 

POLITICAL  economy  has  been  defined,  and  I  think 
sufficiently,  as  "the  science  which  treats  of  the  na- 
ture of  wealth  and  the  laws  of  its  production  and  distri- 
bution." The  object-noun  or  subject-matter  of  political 
economy  is  therefore  wealth.  Now,  as  we  have  already 
seen,  wealth  is  not  the  only  result  of  human  exertion,  nor 
is  it  indeed  the  end  and  aim  and  final  cause  of  human 
exertion.  That  is  not  reached  until  wealth  is  spent  or 
consumed  in  satisfaction  of  desire.  Wealth  itself  is  in  fact 
only  a  halting-place  or  storehouse  on  the  way  between 
prompting  desire  and  final  satisfaction  ;  a  point  at  which 
exertion,  journeying  towards  the  satisfaction  of  desire,  re- 
mains for  a  time  stored  up  in  concrete  form,  and  from 
whence  it  may  be  called  forth  to  yield  the  satisfaction 
which  is  its  ultimate  aim.  And  there  are  exertions  aiming 

301 


302  THE  NATURE  OF  WEALTH.  BooJcII. 

at  the  satisfaction  of  desire  which  do  not  pass  through 
the  form  of  wealth  at  all. 

Why  then  should  political  economy  concern  itself  merely 
with  the  production  and  distribution  of  wealth  ?  Is  not 
the  proper  object  of  the  science  the  production  and  distri- 
bution of  human  satisfactions;  and  would  not  this  defini- 
tion, while  including  wealth,  as  material  satisfactions 
through  material  services,  also  include  services  that  do 
not  take  concrete  form  ? 

My  answer  is  that  I  am  not  engaged  in  laying  out  a  new 
science,  but  only  endeavoring  to  explain  and  straighten 
out  one  that  has  been  already  much  pursued.  I  wish, 
therefore,  as  far  as  possible,  to  follow  old  roads  and  to  use 
accustomed  terms,  only  swerving  from  them  where  they 
clearly  lead  to  error,  of  which  there  are  indeed  instances 
enough. 

And  further  than  this,  I  think  that  reflection  will  show 
that  a  consideration  of  the  production  and  distribution  of 
wealth  will  include  about  all  that  there  is  any  practical  use 
of  considering  of  the  production  and  distribution  of  satis- 
factions. 

While  wealth  does  not  include  the  sum  of  all  exertions 
for  the  satisfaction  of  material  desires,  it  does  include  what 
in  a  highly  civilized  societj^  are  the  far  greater  part  of  them, 
and  is,  as  it  were,  the  exchange  point  or  clearing-house 
where  the  transfer  of  services  devoted  not  to  the  production 
of  wealth,  but  to  the  direct  procurement  of  satisfactions,  is 
made. 

Thus  the  barber,  the  singer,  the  physician,  the  dentist, 
the  actor,  do  not  produce  wealth,  but  direct  satisfactions. 
But  not  only  are  their  efforts  which  are  expended  in  this 
way  mainly  devoted  to  the  procurement  of  wealth,  which 
they  get  in  exchange  for  their  services,  but  any  exchange 
between  themselves  of  services  for  services  takes  place 
through  the  medium  of  wealth.  That  is  to  say,  the  actor 


Chap.  XVIII.       WHY  WEALTH  ALONE  CONSIDERED.        303 

does  not  pay  his  barber  in  recitations,  or  the  singer  pay 
his  physician  in  tones,  nor  yet  reversely  does  the  barber 
or  physician  often  pay  in  shaves  or  medical  advice  for  the 
satisfaction  of  hearing,  acting  or  singing.  Each  habitually 
exchanges  his  services  for  wealth  or  the  representative  of 
wealth,  and  exchanges  this  for  other  services  that  he  may 
desire.  Thus  in  civilized  society  it  is  only  in  rare  and  ex- 
ceptional cases  that  there  is  any  direct  exchange  of  services 
for  services.  To  this  we  may  add  that  the  laws  which 
govern  the  production  and  distribution  of  services  are 
essentially  the  same  as  those  which  govern  the  production 
and  distribution  of  wealth.  Thus  we  see  that  all  the  ends 
of  political  economy  may  be  reached  if  its  inquiry  be  an 
inquiry  into  the  nature  of  wealth  and  the  laws  that  govern 
its  production  and  distribution. 

Political  economy  has  a  duty  and  a  province  of  its  own. 
It  is  not  and  it  cannot  be  the  science  of  everything ;  for 
the  day  in  which  any  one  scheme  can  include  the  whole 
province  of  human  knowledge  has  long  passed,  and  must 
with  the  increase  of  human  knowledge  further  recede. 
Even  to-day  the  science  of  politics,  though  closely  related, 
is,  as  I  conceive  it,  clearly  distinct  from  the  science  of 
political  economy,  to  say  nothing  of  the  almost  numberless 
other  schemes  which  treat  of  man's  relations  to  other 
individuals  and  to  the  relations  with  which  he  is  brought 
in  contact. 


CHAPTER  XIX. 
MORAL  CONFUSIONS  AS  TO  WEALTH. 

SHOWING    HOW   RICH    AND   POOR    ARE    CORRELATIVES,    AND 
WHY  CHRIST  SYMPATHIZED  WITH  THE  POOR. 

The  legitimacy  of  wealth  and  the  disposition  to  regard  it  as  sordid 
and  mean— The  really  rich  and  the  really  poor— They  are  really 
correlatives— The  good  sense  of  Christ's  teaching. 

AS  to  the  desire  for  wealth  in  the  politico-economic  sense, 
XlL  as  I  have  described  it,  there  is  nothing  sordid  or  mean. 
Wealth,  on  the  contrary,  is  a  perfectly  legitimate  object 
of  desire  and  effort.  To  obtain  it  is  simply  to  increase  the 
powers  of  the  individual  over  nature,  and  is  prompted  by 
the  same  essentially  noble  desire  as  in  any  way  to  increase 
our  powers  or  our  knowledge,  or  in  any  way  to  raise  our- 
selves above  the  level  of  the  mere  animal,  from  which  we 
start  5  while  no  one  can  increase  his  own  wealth  in  the 
common  sense  by  increasing  value  from  production,  with- 
out at  the  same  time  doing  something  for  every  one  else. 
How  then  is  it  that  wealth  is  so  widely  regarded  askance 
by  our  moral  perceptions  ;  that  we  are  told' that  we  should 
not  seek  it,  and  hardly  even  use  it;  that  the  highest 
expressions  of  our  deepest  knowledge  look  at  it  so  con- 
temptuously, if  not  repugnantly,  and  that  political  econ- 
omy, which  is  the  science  of  the  nature,  production  and 
exchange  of  wealth,  should  be  so  widely  regarded  as  a 
selfish  and  hard  science  ? 

304    - 


Chap.  XIX.  MOEAL  CONFUSIONS.  305 

If  we  go  into  this  question  at  all  we  must  go  deeper 
than  has  yet,  I  think,  been  done. 

There  is  a  distinction  on  which  our  examination  of 
wealth  and  value  may  throw  light,  the  distinction  we 
commonly  make  between  the  rich  and  the  poor.  We  mean 
by  a  rich  man  a  man  who  is  possessed  of  much  having 
value,  that  is  to  say,  of  much  wealth  or  of  much  power  of 
commanding  wealth  or  services  from  others.  And  by  a 
poor  man  we  mean  a  man  who  possesses  little  or  nothing 
of  such  values.  But  where  is  the  line  of  division  between 
rich  and  poor  ?  There  is  no  line  distinctly  recognized  in 
common  thought,  and  a  man  is  called  rich  or  poor  accord- 
ing to  the  standard  of  average  comfort  prevailing  in  the 
society  or  rather  the  grade  of  society  in  which  the  estimate 
is  made.  Among  Connemara  peasants,  as  in  the  song,  a 
woman  of  three  cows  might  be  esteemed  wealthy ;  while 
among  Esquimaux,  as  in  Mark  Twain's  story,  the  posses- 
sion of  a  few  iron  fish-hooks  might  be  as  convincing  a 
proof  of  riches  as  the  loading  of  a  Christian  woman  with 
diamonds  by  an  American  millionaire.  There  are  circles 
of  human  life  in  New  York  City  in  which  no  man  would 
be  deemed  poor  who  could  see  his  way  to  a  night's  lodging 
and  a  breakfast  in  the  morning,  and  there  are  other  circles 
in  which  a  Vanderbilt  could  say  that  a  man  possessed  of 
only  a  million  dollars  could  with  economy  live  as  comfor- 
tably as  though  he  were  rich. 

But  is  there  not  some  line  the  recognition  of  which  will 
enable  us  to  say  with  something  like  scientific  precision 
that  this  man  is  rich  and  that  man  is  poor ;  some  line  of 
possession  which  will  enable  us  truly  to  distinguish  between 
rich  and  poor  in  all  places  and  conditions  of  society  j  a  line 
of  the  natural,  mean,  or  normal  possession,  below  which 
in  various  degrees  is  poverty,  and  above  which  in  varying 
degrees  is  wealthiness  ?  It  seems  to  me  that  there  must  be. 
And  if  we  stop  to  think  of  it,  we  may  see  that  there  is. 


306  THE  NATURE  OF   WEALTH.  Boole  II. 

If  we  set  aside  for  the  moment  the  narrower  economic 
meaning  of  service,  by  which  direct  service  is  conveniently 
distinguished  from  the  indirect  service  embodied  in  wealth, 
we  may  resolve  all  the  things  which  indirectly  satisfy 
human  desire  into  one  term,  service  j  just  as  we  resolve 
fractions  into  a  common  denominator.  Now,  is  there  not 
a  natural  or  normal  line  of  the  possession  or  enjoyment  of 
service  ?  Clearly  there  is.  It  is  that  of  equality  between 
giving  and  receiving.  This  is  the  equilibrium  which  Con- 
fucius expressed  in  the  golden  word  of  his  teaching  that 
in  English  we  translate  into  "  reciprocity."  Naturally  the 
services  which  a  member  of  a  human  society  is  entitled  to 
receive  from  other  members  are  the  equivalents  of  those 
he  renders  to  others.  Here  is  the  normal  line  from  which 
what  we  call  wealthiness  and  what  we  call  poverty  take 
their  start.  He  who  can  command  more  service  than  he 
need  render,  is  rich.  He  is  poor,  who  can  command  less 
service  than  he  does  render  or  is  willing  to  render ;  for  in 
our  civilization  of  to-day  we  must  take  note  of  the  mon- 
strous fact  that  men  willing  to  work  cannot  always  find 
opportunity  to  work.  The  one  has  more  than  he  ought  to 
have ;  the  other  has  less.  Rich  and  poor  are  thus  correla- 
tives of  each  other ;  the  existence  of  a  class  of  rich  involv- 
ing the  existence  of  a  class  of  poor,  and  the  reverse  j  and 
abnormal  luxury  on  the  one  side  and  abnormal  want  on 
the  other  have  a  relation  of  necessary  sequence.  To  put 
this  relation  into  terms  of  morals,  the  rich  are  the  robbers, 
since  they  are  at  least  sharers  in  the  proceeds  of  robbery ; 
and  the  poor  are  the  robbed. 

This  is  the  reason,  I  take  it,  why  Christ,  who  was  not 
really  a  man  of  such  reckless  speech  as  some  Christians 
deem  Him  to  have  been,  always  expressed  sympathy  with 
the  poor  and  repugnance  of  the  rich.  In  His  philosophy 
it  was  better  even  to  be  robbed  than  to  rob.  In  the  king- 
dom of  right-doing  which  He  preached,  rich  and  poor 


Chap.  XIX.  MORAL  CONFUSIONS.  307 

would  be  impossible,  because  rich  and  poor  in  the  true 
sense  are  the  results  of  wrong-doing.  And  when  He  said, 
"  It  is  easier  for  a  camel  to  pass  through  the  eye  of  a  needle 
than  for  a  rich  man  to  enter  the  kingdom  of  heaven !"  He 
simply  put  in  the  emphatic  forms  of  Eastern  metaphor  a 
statement  of  fact  as  coldly  true  as  the  statement  that  two 
parallel  lines  can  never  meet. 

Injustice  cannot  live  where  justice  rules,  and  even  if  the 
man  himself  might  get  through,  his  riches— his  power  of 
compelling  service  without  rendering  service— must  of 
necessity  be  left  behind.  If  there  can  be  no  poor  in  the 
kingdom  of  heaven,  clearly  there  can  be  no  rich ! 

And  so  it  is  utterly  impossible  in  this,  or  in  any  other 
conceivable  world,  to  abolish  unjust  poverty,  without  at 
the  same  time  abolishing  unjust  possessions.  This  is  a 
hard  word  to  the  softly  amiable  philanthropists  who,  to 
speak  metaphorically,  would  like  to  get  on  the  good  side 
of  God  without  angering  the  devil.  But  it  is  a  true  word 
nevertheless. 


CHAPTER  XX. 
OF  THE  PERMANENCE  OF  WEALTH. 

SHOWING  THAT  VALUES  FROM  OBLIGATION  SEEM  EEALLY  TO 
LAST  LONGER  THAN  VALUES  FROM  PRODUCTION. 

Value  from  production  and  value  from  obligation— The  one  material 
and  the  other  existing  in  the  spiritual— Superior  permanence  of 
the  spiritual — Shakespeare's  boast — Maecenas's  buildings  and 
Horace's  odes— The  two  values  now  existing— Franchises  and 
land  values  last  longer  than  gold  and  gems— Destruction  in  social 
advance— Conclusions  from  all  this. 

IN  making  the  distinction  between  values  from  produc- 
tion that  really  constitute  wealth  in  political  economy, 
and  values  from  obligation,  which  are  not  really  wealth 
at  all,  and  may  at  best  be  classified  as  "  relative  wealth  n 
in  contradistinction  to  "real  wealth,"  there  is  an  im- 
portant and  to  our  usual  ways  of  thinking  an  unexpected 
difference  to  be  mentioned  between  them  with  relation  to 
permanence  and  to  the  effect  of  the  progress  of  society 
upon  their  value. 

Value  from  production,  or  real  wealth,  consists  of  material 
things.  These  things  are  taken  as  it  were  by  labor  from 
the  reservoirs  of  nature,  and  by  virtue  of  their  materiality 
tend  back  to  those  reservoirs  again  from  the  moment  they 
are  taken,  just  as  water,  taken  from  the  ocean,  tends  back 
to  the  ocean.  The  great  body  of  wealth  is,  indeed,  pro- 
duced for  a  purposed  consumption  that  involves  immediate 
destruction.  And  since  I  think  we  may  properly  speak  in 

308 


Chap.  XX.  PERMANENCE  OF  WEALTH.  309 

a  different  sense  of  the  consumption  of  a  book  by  reading 
it,  or  of  a  picture  or  statue  by  looking  at  it,  even  the  parts 
not  subject  to  purposed  and  almost  immediate  destruction, 
are  subject  to  destruction  by  the  action  of  the  elements, 
by  mechanical  and  chemical  disintegration,  and  finally  by 
being  lost.  Indeed,  the  far  greater  part  of  material  things 
if  not  absolutely  all  of  them,  after  they  have  been  brought 
into  existence,  require  the  constant  exertion  of  labor  to 
keep  them  in  existence  and  prevent  their  relapsing  into 
nature's  reservoirs  again. 

But  things  having  a  value  which  does  not  come  from 
the  exertion  of  labor  and  which  represents  only  the  power 
given  by  human  law,  agreement  or  custom  of  appropriating 
the  proceeds  of  exertion,  have  their  real  existence  in  the 
human  mind  or  will,  the  spiritual  element  of  man.  The 
papers  which  we  use  in  transferring  them,  or  proclaiming 
them,  or  evidencing  them,  are  not  the  things  themselves, 
but  mere  aids  to  memory.  The  essence  of  a  debt  is  not 
the  due-bill  or  promissory  note,  but  a  moral  obligation  or 
mental  agreement;  the  essence  of  a  franchise  is  not  the 
written  charter  or  engrossed  act  of  legislature,  but  the 
will  of  the  sovereign,  theoretically  supposed  to  be  the  will 
of  all ;  the  ownership  of  land  is  not  in  the  title-deeds,  but 
in  the  same  sovereign  will  or  supposed  general  agreement. 

As  the  spiritual  part  of  man— mind,  will  and  memory— 
continues  the  same  while  the  matter  of  which  his  body  is 
composed  is  continually  passing,  so  a  mental  impression, 
recorded  by  tradition,  belief  or  custom  in  what  may  be 
styled  the  social  mentality,  may  endure  while  physical 
changes  wrought  by  man  are  lost.  It  is  probable  that  the 
oldest  records  of  man's  presence  on  the  earth  are  to  be 
found  in  words  yet  current,  and  that  nursery  rhymes  and 
children's  games  antedate  the  most  massive  monuments. 
It  was  no  idle  boast  of  Shakespeare  that  his  verse  would 
outlast  marble  and  brass.  The  stately  buildings  raised  by 


310  THE  NATURE  OF  WEALTH.  BoolcIL 

the  powerful  prime  minister  of  Augustus  Ceesar  have  failed 
to  perpetuate  his  memory ;  but  far  further  than  his  world 
extended,  the  name  of  Maecenas  yet  lives  for  us  in  the  odes 
of  Horace. 

Now,  in  the  same  way,  the  values  which  cannot  be  in- 
cluded in  the  category  of  wealth  are  as  a  class  much  more 
enduring  than  the  values  which  are  properly  so  included. 
We  of  the  modern  civilization  generally  limit  the  time 
during  which  debts,  promissory  notes,  and  similar  obliga- 
tions of  the  individual  can  be  legally  enforced.  But  there 
are  devices  by  which  a  value  which  is  in  reality  but  an 
obligation  to  render  future  labor  may  be  continued  for 
longer  periods  j  while  many  values  of  similar  nature  we 
treat  as  perpetual,  as  is  the  case  with  public  debts,  with 
some  franchises,  and  with  exclusive  rights  to  land.  These 
may  retain  their  value  unimpaired,  while  the  value  of  the 
great  body  of  articles  of  wealth  lessens  and  disappears. 

How  little  of  the  wealth  in  existence  in  England  two 
hundred  years  ago  exists  now !  And  the  infinitesimal  part 
that  still  exists  has  been  maintained  in  existence  only  by 
constant  care  and  toil.  But  stock  in  the  public  debt  of 
England  incurred  then  still  retains  value.  So  do  perpetual 
pensions  granted  to  their  favorites  and  lemans  by  English 
kings  long  dust.  So  do  advowsons,  rights  of  fishery  and 
market,  and  other  special  privileges.  While  such  fran- 
chises as  that  of  the  New  River  Company,  and  the  right 
to  the  exclusive  use  of  land  in  many  places  have  enormously 
increased  in  value.  These  things  have  cost  no  care  or 
trouble  to  maintain.  On  the  contrary,  they  have  been 
sources  of  continual  revenue  to  their  owners— have  enabled 
their  owners  to  call  continually  upon  generation  after 
generation  of  Englishmen  to  undergo  toil  and  trouble  for 
their  benefit.  Yet  their  value,  that  is  to  say  their  power 
of  continuing  to  do  this,  remains  still,  not  merely  unim- 
paired, but  in  many  cases  enormously  increased. 


Clmp.XX.  PERMANENCE   OF  WEALTH.  311 

Of  all  articles  of  value  from  production  those  which 
longest  retain  the  quality  of  value  are  precious  metals  and 
gems.  In  the  coin  and  jewelry  passing  from  hand  to  hand 
in  the  exchanges  of  modern  civilization  there  are  doubtless 
some  particles  of  metal  and  some  precious  stones  that  had 
value  at  the  very  dawn  of  history  and  have  retained  it  ever 
since.  But  these  are  rare  and  indistinguishable  exceptions. 
So  far  as  we  can  see  with  any  certainty,  the  quality  of 
value  has  longer  and  more  constantly  attached  to  the 
ownership  of  land,  which  is  not  an  article  of  wealth,  than 
to  any  other  valuable  thing.  The  little  piece  of  land  in 
the  Sabine  hills,  which  Maecenas  gave  to  Horace,  had 
doubtless  been  bought  and  sold  and  exchanged  for  cen- 
turies before  that,  and  has,  I  doubt  not,  a  value  to  this 
day.  And  so,  certainly,  with  some  of  the  building  sites  of 
Rome.  Through  all  the  mutations  in  the  fortunes  of  the 
Imperial  City,  some  of  them  have  doubtless  continually 
held  a  value,  sometimes  lower  and  sometimes  higher.  It 
is  this  permanence  of  value  which  has  led  the  lawyers  to 
distinguish  property  in  land,  though  it  is  not  wealth  at  all, 
as  real  estate  or  real  property.  Its  value  remains  so  long 
as  population  continues  around  it  and  custom  or  municipal 
law  guarantees  the  special  privilege  of  appropriating  the 
profits  of  its  use. 

And  between  articles  of  wealth  and  things  of  the  nature 
of  special  privileges,  like  franchises  and  property  in  land, 
which  though  having  value  are  not  wealth,  there  is  still 
another  very  important  distinction  to  be  noted.  The 
general  tendency  of  the  value  attached  to  the  one  is  to 
decrease  and  disappear  with  social  advance.  The  general 
tendency  of  the  value  attaching  to  the  other  is  to  increase. 

For  social  advance,  involving,  as  it  does,  increase  of 
population,  extensions  of  exchange  and  improvement  of 
the  arts,  tends  constantly,  by  lessening  the  cost  of  produc- 
tion, steadily  to  reduce  the  value  of  the  great  body  of 


OF  THE 

UNIVERSITY 


312  THE  NATURE  OF  WEALTH.  Book  II. 

articles  of  wealth  already  in  existence,  and  having  value 
from  production.  In  some  cases  indeed  the  effect  of  social 
advance  is  suddenly  and  utterly  to  destroy  these  values. 
The  value  of  almost  all  the  products  of  labor  has  been  of 
late  years  steadily  and  largely  reduced  in  this  way,  while 
the  value  of  much  costly  machinery  has  been  and  still  is 
being  destroyed  by  discoveries,  inventions  and  improve- 
ments, which  render  their  use  in  production  antiquated. 
But  the  growth  of  population  and  the  augmentations  of 
the  productive  power  of  labor  increase  enormously  the 
value  of  such  special  privileges  as  franchises  and  land- 
ownership  in  the  highways  and  centers  of  social  life. 

It  will  be  seen  from  our  analysis,  as  indeed  from  obser- 
vation, that  the  amount  of  wealth  at  any  time  existing 
is  very  much  less  than  is  usually  assumed.  The  vast 
majority  of  mankind  live  not  on  stored  wealth,  but  on 
their  exertion.  The  vast  majority  of  mankind,  even  in 
richest  civilized  countries,  leave  the  world  as  destitute  of 
wealth  as  they  entered  it. 

It  is  the  constant  expenditure  of  labor  that  alone  keeps 
up  the  supply  of  wealth.  If  labor  were  to  cease,  wealth 
would  disappear. 

And  while  this  fact,  that  value  from  mere  obligation 
has  a  permanence  which  does  not  belong  to  value  from 
production,  may  have  a  bearing  upon  speculations  too  deep 
to  be  entered  on  here,  and  suggests  perhaps  truth  on  the 
part  of  those  who  say  that  the  material  universe  may  be 
a  mere  reflex  and  correspondence  of  the  moral  and  mental 
universe,  and  that  we  may  find  reality  not  in  what  we  call 
life,  but  in  what  we  call  death,  and  while  it  may  make 
comprehensible  the  resurrection  from  the  dead  which  to 
many  has  been  most  perplexing,  it  has  immediate  bearing 
on  many  things  to  which  any  consideration  of  the  true 
nature  and  bearings  of  wealth  comes  close  if  it  does  not 
closely  touch. 


CHAPTER  XXI. 
THE  RELATION  OF  MONEY  TO  WEALTH. 

SHOWING  THAT  SOME  MONEY  IS  AND  SOME  MONEY  IS  NOT 

WEALTH. 

Where  I  shall  treat  of  money — No  categorical  answer  can  yet  be 
given  to  the  question  whether  money  is  wealth— Some  money  is 
and  some  is  not  wealth. 

THE  subject  of  money,  in  my  view  of  the  matter,  properly 
belongs  to  this  Book,  which  treats  of  the  nature  of 
wealth.  But  the  subject  is  at  the  time  I  write  so  compli- 
cated and  confused  by  current  discussions,  especially  in 
the  United  States,  as  to  require  for  its  complete  elucidation 
a  fullness  of  treatment  that  would  too  much  expand  this 
Book.  And,  moreover,  these  current  discussions  of  what 
is  and  what  ought  to  be  money  involve  principles  which 
do  not  find  their  proper  place  in  the  discussion  of  the 
nature  of  wealth,  but  which  will  be  treated  in  the  succeeding 
books  on  Production  and  Distribution.  For  these  reasons, 
I  shall  postpone  the  full  treatment  of  Money  until  after 
the  laws  of  Production  and  the  laws  of  Distribution  have 
been  discussed.  But  one  question  is  certain  to  occur  to 
the  reader  which  must  be  answered  here— the  question, 
"  Is  money  wealth  ? n 

To  this  no  categorical  answer  can  be  given,  for  the  reason 
that  what  we  properly  call  money  is  in  all  countries  in  our 

313 


314  THE  NATURE  OF  WEALTH.  Eook  II. 

present  stage  of  civilization  of  essentially  different  kinds. 
Some  of  the  money  in  use  to-day  is  wealth,  and  some  of 
it  is  not  wealth.  Some,  such  for  instance  as  the  gold 
coins  of  the  United  States  and  England,  is  wealth  to  the 
full  amount  of  its  circulating  value.  Some,  such  as  the 
silver,  copper  and  bronze  coins  of  the  same  countries,  is 
wealth,  but  not  wealth  to  the  full  extent  of  its  circulating 
value.  While  some,  such  as  the  paper  money,  which  now 
constitutes  so  large  a  part  of  the  money  of  the  civilized 
world,  is  not  wealth  at  all.  For,  as  we  have  seen,  nothing 
is  wealth  in  the  economic  sense,  unless  and  in  so  far  as  the 
value  which  attaches  to  it  is  a  value  of  production.  The 
value  arising  from  obligation  constitutes  no  part  of  the 
wealth  of  nations. 


BOOK  III. 


THE  PRODUCTION  OF  WEALTH 


CONTENTS  OF  BOOK  III. 


THE  PRODUCTION  OF  WEALTH. 


CHAPTER  I. 
THE  MEANING   OF  PRODUCTION. 

SHOWING  THE  MEANING  AND   PROPER  USE   OF  PRODUCTION. 

PAGE 

Production  a  drawing  forth  of  what  before  exists — Its  difference 
from  creation — Production  other  than  of  wealth — Includes 
all  stages  of  bringing  to  be— Mistakes  as  to  it  .  .  .  323 

CHAPTER  n. 
THE  THREE  MODES  OF  PRODUCTION. 

SHOWING  THE  COMMON  CHARACTER,  YET  DIFFERENT  MODES 
OF  PRODUCTION. 

Production  involves  change,  brought  about  by  conscious  will — 
Its  three  modes :  (1)  adapting,  (2)  growing,  (3)  exchanging — 
This  the  natural  order  of  these  modes  ....  327 


CHAPTER  HI. 
POPULATION  AND  SUBSISTENCE. 

SHOWING  THAT  THE  THEORY  OF  A  TENDENCY  IN  POPULATION  TO 
INCREASE  FASTER  THAN  SUBSISTENCE  HAS  PREVIOUSLY  BEEN 
EXAMINED  AND  CONDEMNED. 

The  Malthusian  theory — Discussed  in  ''Progress  and  Poverty"  .  333 

317 


318  CONTENTS  OF  BOOK  III. 


CHAPTER  IV. 

THE  ALLEGED  LAW  OF  DIMINISHING  RETURNS 
IN  AGRICULTURE. 

SHOWING  WHAT  THIS  ALLEGED  LAW  IS. 

PAGE 

John  Stuart  Mill  quoted  as  to  the  importance,  relations  and 
nature  of  this  law— The  reductio  ad  absurdum  by  which  it 
is  proved — Contention  that  it  is  a  misapprehension  of  the  uni- 
versal law  of  space 335 


CHAPTER  V. 
OF  SPACE  AND  TIME. 

SHOWING  THAT  HUMAN  REASON  IS  ONE,  AND   SO  FAR  AS  IT 
CAN   GO  MAY  BE  RELIED   ON. 

Purpose  of  this  work — Of  metaphysics — Danger  of  thinking  of 
words  as  things — Space  and  time  not  conceptions  of  things, 
but  of  relations  of  things — They  cannot,  therefore,  have 
independent  beginning  or  ending — The  verbal  habit  which 
favors  this  idea — How  favored  by  poets  and  by  religious 
teachers — How  favored  by  philosophers — Of  Kant — Of  Scho- 
penhauer— Mysteries  and  antinomies  that  are  really  confusions 
in  the  meaning  of  words — Human  reason  and  the  eternal  reason 
— Philosophers  who  are  really  word-jugglers  ....  339 


CHAPTER  VI. 

CONFUSION  OF  THE  SPACIAL  LAW  WITH  AGRI- 
CULTURE. 

SHOWING  THE  GENESIS   OF  THIS  CONFUSION. 

What  space  is — The  place  to  which  man  is  confined — Extension 
a  part  of  the  concept,  land — Perception  is  by  contrast — Man's 
first  use  of  land  is  by  the  mode  of  adapting — His  second,  and 
for  a  long  time  most  important,  use  is  by  growing — The  third, 
on  which  civilization  is  now  entering,  is  exchanging — Political 
economy  began  in  the  second,  and  growing  still  attracts  most 
attention — The  truth  and  error  of  the  Physiocrats — The  suc- 
cessors of  Smith,  while  avoiding  the  error  of  the  Physiocrats, 
also  ignored  their  truth ;  and  with  their  acceptance  of  the  Mal- 
thusian  theory,  and  Ricardo's  explanation  of  rent  as  relating 
to  agricultural  land,  they  fell  into,  and  have  continued  the 
habit  of  treating  land  and  rent  as  agricultural — Difficulty  of 
the  single  tax  in  the  United  States 351 


CONTENTS  OF  BOOK  HI.  319 

CHAPTER  VII. 
THE  RELATION  OF  SPACE  IN  PRODUCTION. 

SHOWING  THAT  SPACE  HAS  RELATION  TO  ALL  MODES  OF 
PRODUCTION. 

PAGE 

Matter  being  material,  space  must  have  relation  to  all  produc- 
tion— This  relation  readily  seen  in  agriculture — The  concen- 
tration of  labor  in  agriculture  tends  up  to  a  certain  point  to 
increase  and  then  to  diminish  production — But  it  is  a  mis- 
apprehension to  attribute  this  law  to  agriculture  or  to  the 
mode  of  growing— It  holds  in  all  modes  and  sub-divisions  of 
these  modes — Instances :  of  the  production  of  brick,  of  the  mere 
storage  of  brick — Man  himself  requires  space — The  division  of 
labor  as  requiring  space — Intensive  and  extensive  use  of  land  357 

CHAPTER  VHI. 
THE   RELATION  OF  TIME  IN  PRODUCTION. 

SHOWING  THAT  ALL  MODES  OF  PRODUCTION  HAVE  RELATION 
TO  TIME. 

Difference  between  apprehensions  of  space  and  time,  the  one 
objective,  the  other  subjective — Of  spirits  and  of  creation — 
All  production  requires  time— The  concentration  of  labor  in 
time 365 

CHAPTER  IX. 
COOPERATION  — ITS  TWO  WAYS. 

SHOWING  THE  TWO  WATS  OF  COOPERATION. 

Cooperation  is  the  union  of  individual  powers  in  the  attainment 
of  common  ends — Its  ways  and  their  analogues :  (1)  the  com- 
bination of  effort ;  (2)  the  separation  of  effort — Illustrations : 
of  building  houses,  of  joint-stock  companies,  etc. — Of  sailing  a 
boat — The  principle  shown  in  naval  architecture— The  Erie 
Canal — The  baking  of  bread — Production  requires  conscious 
thought — The  same  principle  in  mental  effort — What  is  on 
the  one  side  separation  is  on  the  other  concentration — Extent 
of  concentration  and  specialization  of  work  in  modern  civiliza- 
tion— The  principle  of  the  machine — Beginning  and  increase 
of  division  of  labor — Adam  Smith's  three  heads — A  better 
analysis 371 


320  CONTENTS  OF  BOOK  III. 


CHAPTER  X. 
COOPERATION  — ITS  TWO  KINDS. 

SHOWING  THE  TWO  KINDS  OP  COOPERATION,  AND  HOW  THE 
POWER  OF  THE  ONE  GREATLY  EXCEEDS  THAT  OF  THE  OTHER. 

PAGE 

The  kind  of  cooperation  which,  as  to  method  of  union  or  how  of 
initiation,  results  from  without  and  may  be  called  directed 
or  conscious  cooperation— Another  proceeding  from  within 
which  may  be  called  spontaneous  or  unconscious  cooperation 
— Types  of  the  two  kinds  and  their  analogues— Tacking  of  a 
full-rigged  ship  and  of  a  bird — Intelligence  that  suffices  for 
the  one  impossible  for  the  other — The  savage  and  the  ship — 
Unconscious  cooperation  required  in  ship-building — Conscious 
cooperation  will  not  suffice  for  the  work  of  unconscious — The 
fatal  defect  of  socialism — The  reason  of  this  is  that  the  power 
of  thought  is  spiritual  and  cannot  be  fused  as  can  physical 
force — Of  "man  power  "and  "mind  power" — Illustration  from 
the  optician— Impossibility  of  socialism — Society  a  Leviathan 
greater  than  that  of  Hobbes 382 


CHAPTER  XI. 
THE  OFFICE  OF  EXCHANGE  IN  PRODUCTION. 

SHOWING  THAT  IN  MAN  THE  LACK  OF  INSTINCT  IS  SUPPLIED 
BY  THE  HIGHER  QUALITY  OF  REASON,  WHICH  LEADS  TO  EX- 
CHANGE. 

The  cooperation  of  ants  and  bees  is  from  within  and  not  from 
without ;  from  instinct  and  not  from  direction — Man  has  little 
instinct;  but  the  want  supplied  by  reason— Reason  shows 
itself  in  exchange — This  suffices  for  the  unconscious  coopera- 
tion of  the  economic  body  or  Greater  Leviathan — Of  the  three 
modes  of  production,  exchanging  is  the  highest— Mistake  of 
writers  on  political  economy — The  motive  of  exchange  .  .  397 


CHAPTER  XII. 
OFFICE  OF  COMPETITION  IN  PRODUCTION. 

SHOWING  THAT  COMPETITION  BRINGS  TRADE,  AND   CONSE- 
QUENTLY SERVICE,  TO  ITS  JUST  LEVEL. 

"Competition  is  the  life  of  trade,"  an  old  and  true  adage — The 
assumption  that  it  is  an  evil  springs  from  two  causes — one 
bad,  the  other  good  —The  bad  cause  at  the  root  of  protection- 
ism— Law  of  competition  a  natural  law — Competition  neces- 
sary to  civilization 402 


CONTENTS  OF  BOOK  III.  321 


CHAPTER  XIII. 

PAGE 

OF  DEMAND  AND  SUPPLY  IN  PRODUCTION         404 


CHAPTER  XIV. 
ORDER  OF  THE  THREE  FACTORS  OF  PRODUCTION. 

SHOWING  THE  AGREEMENT  OF  ALL  ECONOMISTS  AS  TO  THE 
NAMES  AND  ORDER  OF  THE  FACTORS  OF  PRODUCTION. 

Land  and  labor  necessary  elements  in  production — Union  of  a 
composite  element,  capital — Reason  for  dwelling  on  this  agree- 
ment as  to  order 405 


CHAPTER  XV. 
THE  FIRST  FACTOR  OF  PRODUCTION— LAND. 

SHOWING  THAT  LAND   IS  THE  NATURAL  OR  PASSIVE  FACTOR 
IN  ALL  PRODUCTION. 

The  term  land— Landowners — Labor  the  only  active  factor        .  408 


CHAPTER  XVI. 
THE  SECOND  FACTOR  OF  PRODUCTION— LABOR. 

SHOWING  THAT  LABOR  IS  THE  HUMAN  OR  ACTIVE  FACTOR 
IN  ALL  PRODUCTION. 

The  term  labor — It  is  the  only  active  factor  in  producing  wealth, 
and  by  nature  spiritual 411 


CHAPTER  XVn. 
THE  THIRD  FACTOR  OF  PRODUCTION— CAPITAL. 

SHOWING  THAT  CAPITAL  IS  NOT  A  PRIMARY  FACTOR,  BUT  PROCEEDS 
FROM  LAND  AND  LABOR,  AND  IS  A  FORM  OR  USE  OF  WEALTH. 

Capital  is  essentially  labor  raised  to  a  higher  power — Where  it 
may,  and  where  it  must  aid  labor — In  itself  it  is  helpless         .  413 


CHAPTER  I.i 
THE  MEANING  OF  PRODUCTION. 

SHOWING  THE  MEANING  AND  PROPER  USE  OF  PRODUCTION. 

Production  a  drawing  forth  of  what  before  exists— Its  difference  from 
creation— Production  other  than  of  wealth— Includes  all  stages 
of  bringing  to  be— Mistakes  as  to  it. 

THE  word  production  comes  from  the  Latin,  pro,  be- 
fore, and  ducere,  to  draw,  and  its  literal  meaning  is 
a  drawing  forth. 

Production,  as  a  term  of  political  economy,  means  a 
drawing  forth  by  man ;  a  bringing  into  existence  by  the 
power  of  man.  It  does  not  mean  creation,  the  proper 
sense  of  which  is  the  bringing  into  existence  by  a  power 
superior  to  that  of  man— that  power  namely  which  to 
escape  negation  our  reason  is  compelled  to  postulate  as 
the  final  cause  of  all  things. 

A  solar  system,  a  world  with  all  the  substances  and 
powers  therein  contained,  soil,  water  and  air,  chemical 
affinities,  vital  forces,  the  invariable  sequences  which  we 
term  natural  laws,  vegetables  and  animals  in  their  species 
as  they  exist  irrespective  of  the  modifying  influence  of 
man,  and  man  himself  with  his  natural  powers,  needs  and 
impulses,  we  properly  speak  of  as  created.  How  precisely 

1  No  introduction  or  motto  supplied  for  Book  III.  in  MS.  —  H.  GL,  JB. 
323 


324  THE  PRODUCTION  OF  WEALTH.          Book  III. 

they  came  to  be,  and  what  and  whence  the  originating 
impulse,  we  cannot  tell,  and  probably  in  the  sphere  to 
which  we  are  confined  in  this  life  can  never  know.  All 
we  can  say  with  certainty,  is  that  they  cannot  have  been 
brought  into  existence  by  any  power  of  man ;  that  they 
existed  before  man  was,  and  constitute  the  materials  and 
forces  on  which  his  existence  depends  and  on  which  and 
from  which  all  his  production  is  based.  Since  they  cannot 
have  come  from  what  we  call  matter  alone ;  nor  from  what 
we  call  energy  alone ;  nor  yet  from  any  union  of  these  two 
elements  alone,  they  must  proceed  primarily  from  that 
originating  element  that  in  the  largest  analysis  of  the 
world  that  reason  enables  us  to  make  we  distinguish  from 
matter  and  energy  as  spirit. 

Nothing  that  is  created  can  therefore  in  the  politico- 
economic  sense  be  said  to  be  produced.  Man  is  not  a 
creator ;  he  has  no  power  of  originating  things,  of  making 
something  out  of  nothing.  He  is  a  producer ;  that  is  to 
say  a  changer,  who  brings  forth  by  altering  what  already 
is.  All  his  making  of  things,  his  causing  things  to  be,  is 
a  drawing  forth,  a  modification  in  place  or  relation,  and  in 
accordance  with  natural  laws  which  he  neither  originated 
nor  altered,  of  what  he  finds  already  in  existence.  All  his 
production  has  as  its  substratum  what  he  finds  already  in 
the  world ;  what  exists  irrespective  of  him.  This  substra- 
tum or  nexus,  the  natural  or  passive  factor,  on  which  and 
by  which  the  human  or  active  factor  of  production  acts, 
is  in  the  terminology  of  political  economy  called  land. 

It  is  to  be  noted  that  when  used  as  a  term  of  political 
economy  the  word  "  production n  has  in  some  respects  a 
narrower,  and  in  some  respects  a  wider,  meaning  than  is 
often,  in  common  use  properly  enough,  attached  to  it. 
Since  the  production  with  which  political  economy  pri- 
marily deals  is  the  production  of  wealth,  the  economic  term 
production  refers  to  that.  But  it  is  important  to  bear  in 


Cliap.  I.  THE  MEANING  OF  PRODUCTION.  325 

mind  that  the  production  of  wealth  is  not  the  only  kind  of 
production. 

I  have  alluded  to  this  fact  before  in  Chapter  XVIII.  of 
Book  II.  Let  me  speak  of  it  again. 

I  black  my  boots ;  I  shave  my  face  j  I  take  a  violin  and 
play  on  it,  or  expend  effort  in  learning  to  do  so ;  I  write  a 
poem  j  or  observe  the  habits  of  bees ;  or  try  to  make  an 
hour  pass  more  agreeably  to  a  sick  friend  by  reading  to 
him  something  which  arouses  and  pleases  his  higher  na- 
ture. In  such  ways  I  am  satisfying  wants  or  gratifying 
desires,  cultivating  powers  or  increasing  knowledge,  either 
for  myself  or  for  others.  But  I  am  not  producing  wealth. 
And  so,  those  who  in  the  cooperation  of  efforts  in  which 
civilization  consists  devote  themselves  to  such  occupations 
—boot-blacks,  barbers,  musicians,  teachers,  investigators, 
surgeons,  nurses,  poets,  priests— do  not,  strictly  speaking, 
take  part  in  the  production  of  wealth.  Yet  it  may  be  mis- 
leading to  speak  of  them  as  non-producers,  without  care 
as  to  what  is  really  meant.  Though  not  producers  of 
wealth,  they  are  yet  producers,  and  often  producers  of  the 
highest  kind.  They  are  producers  of  utilities  and  satisfac- 
tions ;  and  as  such  are  not  only  producers  of  that  to  which 
wealth  is  but  a  means,  but  may  indirectly  aid  in  the  pro- 
duction of  wealth  itself. 

On  the  other  hand  there  is  something  we  should  note. 

In  common  speech,  the  word  production  is  frequently 
used  in  a  sense  which  distinguishes  the  first  from  the  later 
stages  of  wealth-getting ;  and  those  engaged  in  the  primary 
extractive  or  formative  processes  are  often  styled  pro- 
ducers, as  distinguished  from  transporters  or  exchangers. 
This  use  of  the  word  production  may  be  convenient 
where  we  wish  to  distinguish  between  separable  functions, 
but  we  must  be  careful  not  to  import  it  into  our  habitual 
use  of  the  economic  term.  In  the  economic  meaning  of 
the  term  production,  the  transporter  or  exchanger,  or  any 


326  THE  PRODUCTION  OF  WEALTH.          Book  HI. 

one  engaged  in  any  sub-division  of  those  functions,  is  as 
truly  engaged  in  production  as  is  the  primary  extractor 
or  maker.  A  newspaper-carrier  or  the  keeper  of  a  news- 
stand would  for  instance  in  common  speech  be  styled  a 
distributor.  But  in  economic  terminology  he  is  not  a  dis- 
tributor of  wealth,  but  a  producer  of  wealth.  Although 
his  part  in  the  process  of  producing  the  newspaper  to  the 
final  receiver  comes  last,  not  first,  he  is  as  much  a  producer 
as  the  paper-maker  or  type-founder,  the  editor  or  com- 
positor or  press-man. 

For  the  object  of  production  is  the  satisfaction  of 
human  desires,  that  is  to  say  it  is  consumption ;  and  this 
object  is  not  made  capable  of  attainment,  that  is  to  say, 
production  is  not  really  complete,  until  wealth  is  brought 
to  the  place  where  it  is  to  be  consumed  and  put  at  the  dis- 
posal of  him  whose  desire  it  is  to  satisfy. 

Thus,  the  production  of  wealth  in  political  economy  in- 
cludes transportation  and  exchange.  The  distribution  of 
wealth,  on  the  other  hand,  has  in  economic  phraseology  no 
relation  to  transportation  or  exchange,  but  refers,  as  we 
shall  see  when  we  come  to  treat  of  it,  to  the  division  of 
the  results  of  production. 

This  fact  has  been  ignored  by  the  great  majority  of 
professed  economists  who  with  few  exceptions  treat  of 
exchange  under  the  head  of  the  distribution  of  wealth  in- 
stead of  giving  it  its  proper  place  under  the  head  of  the 
production  of  wealth, 


CHAPTER  II. 
THE  THREE  MODES  OF  PRODUCTION. 

SHOWING  THE  COMMON  CHARACTER,  YET  DIFFERENT  MODES 
OF  PRODUCTION. 

Production  involves  change,  brought  about  by  conscious  will — Its 
three  modes  :  (1)  adapting,  (2)  growing,  (3)  exchanging— This  the 
natural  order  of  these  modes. 

ALL  production  results  from  human  exertion  upon  ex- 
JLX  ternal  nature,  and  consists  in  the  changing  in  place, 
condition,  form  or  combination  of  natural  materials  or 
objects  so  as  to  fit  them  or  more  nearly  fit  them  for  the 
satisfaction  of  human  desires.  In  all  production  use  is 
made  of  natural  forces  or  potencies,  though  in  the  first 
place,  the  energy  in  the  human  frame  is  brought  under  the 
direct  control  of  the  conscious  human  will. 

But  production  takes  place  in  different  ways.  If  we 
run  over  in  mind  as  many  examples  as  we  can  think  of  in 
which  the  exertion  of  labor  results  in  wealth— either  in 
those  primary  or  extractive  stages  of  production  in  which 
what  before  was  not  wealth  is  made  to  assume  the  charac- 
ter of  wealth ;  or  in  the  later  or  secondary  stages,  in  which 
an  additional  value  or  increment  of  wealth  is  attached  to 
what  has  already  been  given  the  character  of  wealth— 
we  find  that  they  fall  into  three  categories  or  modes. 

The  first  of  these  three  modes  of  production,  for  both 
reason  and  tradition  unite  in  giving  it  priority,  is  that  in 

327 


328  THE  PRODUCTION  OF  WEALTH.          Boole  HI. 

which,  in  the  changes  he  brings  about  in  natural  substances 
and  objects,  man  makes  use  only  of  those  natural  forces 
and  potencies  which  we  may  conceive  of  as  existing  or 
manifesting  themselves  in  a  world  as  yet  destitute  of  life  j 
or  perhaps  it  might  afford  a  better  illustration  to  say,  in 
a  world  from  which  the  generative  or  reproductive  prin- 
ciple of  life  had  just  departed,  or  been  by  his  condition 
rendered  unutilizable  by  man.  These  would  include  all 
such  natural  forces  and  potencies  as  gravitation,  heat, 
light,  electricity,  cohesion,  chemical  attractions  and  repul- 
sions—in short,  all  the  natural  forces  and  relations,  that 
are  utilized  in  the  production  of  wealth,  below  those 
incident  to  the  vital  force  of  generation. 

We  can  perhaps  best  imagine  such  a  separation  of  natural 
forces  by  picturing  to  ourselves  a  Robinson  Crusoe  thrown 
upon  a  really  desert  island  or  bare  sand  key,  in  a  ship 
abundantly  supplied  with  marine  stores,  tools  and  food  so 
dried  or  preserved  as  to  be  incapable  of  growth  or  repro- 
duction. We  might  also,  if  we  chose,  imagine  the  ship  to 
contain  a  dog,  a  goat,  or  indeed  any  number  of  other  ani- 
mals, provided  there  was  no  pairing  of  the  sexes.  We 
cannot,  in  truth,  imagine  even  a  bare  sand  key,  in  which 
there  should  be  no  manifestation  of  the  generative  prin- 
ciple, in  insects  and  vegetables,  if  not  in  the  lower  forms 
of  fish  and  bird  life,  but  we  can  readily  imagine  that  our 
Robinson  might  not  understand,  or  might  not  find  it  con- 
venient, to  avail  himself  of  such  manifestations  of  the 
reproductive  principle.  Yet  without  any  use  of  the  prin- 
ciple by  which  things  may  be  made  to  grow  and  increase, 
such  a  man  would  still  be  able  to  produce  wealth,  since 
by  changing  in  place,  form  or  combination  what  he  found 
already  in  existence  in  his  island  or  in  his  ship,  he  could 
fit  them  to  the  satisfaction  of  his  desires.  Thus  he  could 
produce  wealth  just  as  De  Foe's  Robinson  Crusoe,  whose 
solitary  life  so  many  of  us  have  shared  in  imagination, 


CJiap.  1L     THE  THREE  MODES  OF  PRODUCTION.  329 

produced  wealth  when  he  first  landed,  by  bringing  desir- 
able things  from  the  wrecked  ship  to  the  safety  of  the 
shore  before  destructive  gales  came  on,  and  by  changing 
the  place  and  form  of  such  of  them  as  were  fit  for  his 
purpose,  making  himself  a  cabin,  a  boat,  sails,  nets,  clothes, 
and  so  on.  In  the  same  way,  he  could  catch  fish,  kill  or 
snare  birds,  capture  turtles,  take  eggs,  and  convert  the 
food-material  at  his  disposal  into  more  toothsome  dishes. 
Thus  without  growing  or  breeding  anything  he  could  get 
by  his  labor  a  living,  until  death,  or  the  savages,  or  an- 
other ship  came. 

For  this  mode  of  production,  which  is  mechanical  in  its 
nature,  and  consists  in  the  change  in  place,  form,  condition 
or  combination  of  what  is  already  in  existence,  it  seems  to 
me  that  the  best  term  is  "  adapting." 

This  is  the  mode  of  production  of  the  fisherman,  the 
hunter,  the  miner,  the  smelter,  the  refiner,  the  mechanic, 
the  manufacturer,  the  transporter  j  and  also  of  the  butcher, 
the  horse-breaker  or  animal-trainer,  who  is  not  also  a 
breeder.  We  use  it  when  we  produce  wealth  by  taking 
coal  from  the  vein  and  changing  its  place  to  the  surface 
of  the  earth  j  and  again  when  we  bring  about  a  further 
increment  of  wealth  by  carrying  the  coal  to  the  place 
where  it  is  to  be  consumed  in  the  satisfaction  of  human 
desire.  We  use  this  mode  of  production  when  we  convert 
trees  into  lumber,  or  lumber  into  boards ;  when  we  con- 
vert wheat  into  flour,  or  the  juice  of  the  cane  or  beet  into 
sugar;  when  we  separate  the  metals  from  the  combina- 
tions in  which  they  are  found  in  the  ores,  and  when  we 
unite  them  in  new  combinations  that  give  us  desirable 
alloys,  such  as  brass,  type-metal,  Babbitt  metal,  aluminum, 
bronze,  etc. ;  or  when  by  the  various  processes  of  separat- 
ing and  re-combining  we  produce  the  textile  fabrics,  and 
convert  them  again  into  clothes,  sails,  bags,  etc.  j  or  when 
by  bringing  their  various  materials  into  suitable  forms 


330  THE  PRODUCTION  OF  WEALTH.          BooJcIII. 

and  combinations,  we  construct  tools,  machines,  ships  or 
houses.  In  fact,  all  that  in  the  narrower  sense  we  usually 
call  "  making,"  or,  if  on  a  large  scale,  "  manufacturing,"  is 
brought  about  by  the  application  of  labor  in  this  first  mode 
of  production— the  mode  of  "  adapting." 

In  the  Northwest,  however,  they  speak  sometimes  of 
"manufacturing  wheat;  "  in  the  West  of  " making  hogs," 
and  in  the  South  of  "making  cotton"  (the  fiber)  or  "making 
tobacco"  (the  leaf).  But  in  such  local  or  special  sense 
the  words  manufacturing  or  making  are  used  as  equiva- 
lent to  producing.  The  sense  is  not  the  same,  nor  is 
the  suggested  action  in  the  same  mode,  as  when  we  prop- 
erly speak  of  flour  as  being  manufactured,  or  of  bacon, 
cotton  cloth  or  cigars  being  made.  Wonderful  machines 
are  indeed  constructed  by  man's  power  of  adaptation.  But 
no  extension  of  this  power  of  adaptation  will  enable  him 
to  construct  a  machine  that  will  feed  itself  and  produce 
its  kind.  His  power  of  adapting  extended  infinitely  would 
not  enable  him  to  manufacture  a  single  wheat-grain  that 
would  sprout,  or  to  make  a  hog,  a  cotton-boll  or  a  tobacco- 
leaf.  The  tiniest  of  such  things  are  as  much  above  man's 
power  of  adapting  as  is  the  "making"  of  a  world  or  the 
"manufacture"  of  a  solar  system. 

There  is,  however,  another  or  second  mode  of  produc- 
tion. In  this  man  utilizes  the  vital  or  reproductive  force 
of  nature  to  aid  him  in  the  producing  of  wealth.  By  ob- 
taining vegetables,  cuttings  or  seeds,  and  planting  them ; 
by  capturing  animals  and  breeding  them,  we  are  enabled 
not  merely  to  produce  vegetables  and  animals  in  greater 
quantity  than  Nature  spontaneously  offers  them  to  our 
taking,  but,  in  many  cases,  to  improve  their  quality  of 
adaptability  to  our  uses.  This  second  mode  of  production, 
the  mode  in  which  we  make  use  of  the  vital  or  generative 
power  of  nature,  we  shall,  I  think,  best  distinguish  from 
the  first,  by  calling  it  "  growing."  It  is  the  mode  of  the 


Chap.  II.     THE  THREE  MODES  OF   PRODUCTION.  331 

farmer,  the  stock-raiser,  the  florist,  the  bee-keeper,  and  to 
some  extent  at  least  of  the  brewer  and  distiller. 

And  besides  the  first  mode,  which  we  have  called  "  adapt- 
ing," and  the  second  mode,  which  we  have  called  "  grow- 
ing," there  is  still  a  third  mode  in  which,  by  men  living  in 
civilization,  wealth  is  produced.  In  the  first  mode  we 
make  use  of  powers  or  qualities  inherent  in  all  material 
things ;  in  the  second  we  make  use  of  powers  or  qualities 
inherent  in  all  living  things,  vegetable  or  animal.  But 
this  third  mode  of  production  consists  in  the  utilization  of 
a  power  or  principle  or  tendency  manifested  only  in  man, 
and  belonging  to  him  by  virtue  of  his  peculiar  gift  of 
reason — that  of  exchanging  or  trading. 

That  it  is  by  and  through  his  disposition  and  power  to 
exchange,  in  which  man  essentially  differs  from  all  other 
animals  that  human  advance  goes  on,  I  shall  hereafter 
show.  Yet  not  merely  is  it  through  exchange  that  the 
utilization  in  production  of  the  highest  powers  both  of  the 
human  factor  and  the  natural  factor  becomes  possible,  but 
it  seems  to  me  that  in  itself  exchange  brings  about  a  per- 
ceptible increase  in  the  sum  of  wealth,  and  that  even  if 
we  could  ignore  the  manner  in  which  it  extends  the  power 
of  the  other  two  modes  of  production,  this  constitutes  it, 
in  itself,  a  third  mode  of  production.  In  the  Yankee  story 
of  the  two  school-boys  so  cute  at  a  trade  that  when  locked 
in  a  room  they  made  money  by  swapping  jack-knives, 
there  is  the  exaggeration  of  a  truth.  Each  of  the  two 
parties  to  an  exchange  aims  to  get,  and  as  a  rule  does  get, 
something  that  is  more  valuable  to  him  than  what  he 
gives— that  is  to  say,  that  represents  to  him  a  greater 
power  of  labor  to  satisfy  desire.  Thus  there  is  in  the 
transaction  an  actual  increase  in  the  sum  of  wealth,  an 
actual  production  of  wealth.  A  trading-vessel,  for  in- 
stance, penetrating  to  the  Arctic,  exchanges  fish-hooks, 
harpoons,  powder  and  guns,  knives  and  mirrors,  green 


332  THE  PKODUCTION  OF  WEALTH.          BooJcIIL 

spectacles  and  mosquito-nets  for  peltries.  Each  party  to 
the  exchange  gets  in  return  for  what  costs  it  compara- 
tively little  labor  what  would  cost  it  a  great  deal  of  labor 
to  get  by  either  of  the  other  modes  of  production.  Each 
gains  by  the  act.  Eliminating  transportation,  which  be- 
longs to  the  first  mode  of  production,  the  joint  wealth  of 
both  parties,  the  sum  of  the  wealth  of  the  world,  is  by  the 
exchange  itself  increased. 

This  third  mode  of  production  let  us  call  "  exchanging." 
It  is  the  mode  of  the  merchant  or  trader,  of  the  store- 
keeper, or  as  the  English  who  still  live  in  England  call  him, 
the  shopkeeper  j  and  of  all  accessories,  including  in  large 
measure  transporters  and  their  accessories. 

We  thus  have  as  the  three  modes  of  production : 

(1)  ADAPTING; 

(2)  GROWING; 

(3)  EXCHANGING. 

These  modes  seem  to  appear  and  to  assume  importance 
in  the  development  of  human  society  much  in  the  order 
here  given.  They  originate  from  the  increase  of  the  de- 
sires of  men  with  the  increase  of  the  means  of  satisfying 
them  under  pressure  of  the  fundamental  law  of  political 
economy,  that  men  seek  to  satisfy  their  desires  with  the 
least  exertion.  In  the  primitive  stage  of  human  life  the 
readiest  way  of  satisfying  desires  is  by  adapting  to  human 
use  what  is  found  in  existence.  In  a  later  and  m  ore  settled 
stage  it  is  discovered  that  certain  desires  can  be  more 
easily  and  more  fully  satisfied  by  utilizing  the  principle  of 
growth  and  reproduction,  as  by  cultivating  vegetables  and 
breeding  animals.  And  in  a  still  later  period  of  develop- 
ment, it  becomes  obvious  that  certain  desires  can  be  better 
and  more  easily  satisfied  by  exchange,  which  brings  out 
the  principle  of  cooperation  more  fully  and  powerfully 
than  it  could  obtain  among  unexchanging  economic  units. 


CHAPTER   III. 
POPULATION  AND   SUBSISTENCE. 

SHOWING  THAT  THE  THEORY  OF  A  TENDENCY  IN  POPULATION 
TO  INCREASE  FASTER  THAN  SUBSISTENCE  HAS  PREVIOUSLY 
BEEN  EXAMINED  AND  CONDEMNED. 

The  Malthusian  theory— Discussed  in  "Progress  and  Poverty." 

IN  proceeding  to  consider  the  laws  of  the  production  of 
wealth  it  would  be  expedient  first  to  consider  any  nat- 
ural law,  if  such  there  should  be,  which  would  limit  the 
operation  of  man  in  production.  In  the  Malthusian  theory 
the  scholastic  political  economy  has  held  that  there  is  a 
law  of  nature  that  produces  a  tendency  in  population  to 
increase  faster  than  subsistence.  This,  coming  as  it  did, 
in  the  formative  period  of  the  institution  of  the  science, 
was  really  the  bulwark  of  the  long-accepted  political  econ- 
omy, which  gave  to  the  wealthy  a  comfortable  theory  for 
putting  upon  the  Originating  Spirit  the  responsibility  for 
all  the  vice,  crime  and  suffering,  following  from  the  unjust 
actions  of  men,  that  constitute  the  black  spot  of  .our  nine- 
teenth-century civilization.  Falling  in  with  the  current 
doctrine  that  wages  are  determined  by  the  ratio  between 
capital  and  labor,  deriving  support  from  the  principle 
brought  prominently  forward  in  current  discussions  of  the 
theory  of  rent,  that  past  a  certain  point  the  application  of 
capital  and  labor  to  land  yields  a  diminishing  return,  and 

333 


334  THE  PEODUCTION  OF  WEALTH.          Book  III. 

harmonizing  with  the  theory  of  the  development  of  species 
by  selection,  it  became  of  the  utmost  importance,  and  for 
a  long  time  imposed  even  upon  well-disposed  and  fair- 
minded  men  a  weight  of  authority  of  which  they  could 
not  rid  themselves.  But  in  " Progress  and  Poverty"  I 
devoted  to  it  an  entire  Book,  consisting  of  four  chapters. 
In  this,  with  what  follows,  I  so  disposed  of  the  theory  that 
it  is  not  necessary  to  go  over  the  reasoning  again,  but  can 
refer  to  my  previous  work  those  who  may  wish  to  inquire 
as  to  the  nature,  grounds  and  disproof  of  that  theory. 

As  the  space  of  that  work  did  not  allow  me  to  go  over 
the  whole  scope  of  political  economy,  but  only  to  cover  its 
more  salient  points,  it  will  be  well  here  to  examine,  what 
I  did  not  do  thoroughly  in  that  work,  the  doctrine  of  the 
law  of  diminishing  returns  in  agriculture.  Since  this  doc- 
trine has  not  yet  to  my  knowledge  been  questioned,  it 
will  be  well  to  do  this  thoroughly. 


CHAPTER   IV. 

THE  ALLEGED  LAW  OF  DIMINISHING  RETURNS 
IN  AGRICULTURE. 

SHOWING  WHAT  THIS  ALLEGED  LAW  IS. 

John  Stuart  Mill  quoted  as  to  the  importance,  relations  and  nature 
of  this  law— The  reductio  ad  absurdum  by  which  it  is  proved— 
Contention  that  it  is  a  misapprehension  of  the  universal  law  of 
space. 

BEFORE  proceeding  to  the  subject  of  cooperation  it  is 
necessary  to  consider,  if  but  to  clear  the  way,  what 
is  treated  in  standard  economic  works  since  the  time  of 
Adam  Smith  as  the  most  important  law  of  production, 
and  indeed  of  political  economy  as  a  whole.  This  is  what 
is  called  "  The  Law  of  Diminishing  Production,"  or  more 
fully  and  exactly,  "  The  Law  of  Diminishing  Returns  in 
Agriculture."  Of  it  John  Stuart  Mill  ("Principles  of 
Political  Economy,"  Book  I.,  Chapter  XII.,  Sec.  2)  says : 

This  general  law  of  agricultural  industry  is  the  most  important 
proposition  in  Political  Economy.  Were  the  law  different  nearly  all 
the  phenomena  of  the  production  and  distribution  of  wealth  would 
be  other  than  they  are. 

This  view  of  the  importance  of  "  the  law  of  diminishing 
returns  in  agriculture"  pervades  the  standard  political 
economies,  and  is  held  by  the  most  recent  scholastic  writers, 
such  as  Professor  Walker  of  the  United  States  and  Pro- 

335 


336  THE  PRODUCTION  OF  WEALTH.          Boole  III. 

f  essor  Marshall  of  England,  as  by  Mill  and  his  predecessors. 
It  arises  from  the  relation  of  this  alleged  law  to  current 
apprehensions  of  the  law  of  rent;  and  especially  from  the 
support  which  it  seems  to  give  to  the  Malthusian  doctrine 
that  population  tends  to  outrun  subsistence— a  support 
to  which  the  long  acceptance  of  that  doctrine  is  due. 

Thus,  as  the  necessary  consequence  of  this  "law  of 
diminishing  returns  in  agriculture/'  John  Stuart  Mill  in 
Book  I.,  Chapter  XIII.,  Sec.  2,  of  his  "  Principles  of  Politi- 
cal Economy,"  says : 

In  all  countries  which  have  passed  beyond  a  rather  early  stage  in 
the  progress  of  agriculture,  every  increase  in  the  demand  for  food, 
occasioned  by  increased  population,  will  always,  unless  there  is  a 
simultaneous  improvement  in  production,  diminish  the  share  which 
on  a  fair  division  would  fall  to  each  individual.  .  .  .  From  this, 
results  the  important  corollary,  that  the  necessity  of  restraining 
population  is  not,  as  many  persons  believe,  peculiar  to  a  condition 
of  great  inequality  of  property.  A  greater  number  of  people  cannot, 
in  any  given  state  of  civilization  be  collectively  so  well  provided  for 
as  a  smaller.  The  niggardliness  of  nature,  not  the  injustice  of 
society,  is  the  cause  of  the  penalty  attached  to  overpopulation.  An 
unjust  distribution  of  wealth  does  not  even  aggravate  the  evil,  but 
at  most  causes  it  to  be  somewhat  earlier  felt.  It  is  in  vain  to  say, 
that  all  mouths  which  the  increase  of  mankind  calls  into  existence 
bring  with  them  hands.  The  new  mouths  require  as  much  food  as 
the  old  ones,  and  the  hands  do  not  produce  as  much. 

As  to  the  law  itself,  from  which  such  tremendous  conse- 
quences are  confidently  deduced— consequences  which  put 
us  to  the  mental  confusion  of  denying  the  justice  of  the 
Creator,  and  assuming  that  the  Originating  Spirit  is  so 
poor  a  contriver  as  to  be  constantly  doing  what  any  mere 
human  host  would  be  ashamed  to  be  guilty  of,  bringing 
more  guests  to  his  table  than  could  be  fed— it  is  thus 
stated  by  Mill : 

After  a  certain  and  not  very  advanced  stage  in  the  progress  of 
agriculture ;  as  soon,  in  fact,  as  mankind  have  applied  to  cultivation 


Cliap.  IV.  OF  DIMINISHING  EETURNS.  337 

with  any  energy,  and  have  brought  to  it  any  tolerable  tools ;  from 
that  time  it  is  the  law  of  production  from  the  land,  that  in  any  given 
state  of  agricultural  skill  and  knowledge,  by  increasing  the  labor,  the 
produce  is  not  increased  in  equal  degree ;  doubling  labor  does  not 
increase  the  produce ;  or  to  express  the  same  thing  in  other  words, 
every  increase  of  produce  is  obtained  by  a  more  than  proportional 
increase  in  the  application  of  labor  to  the  land. 

This  law  of  diminishing  returns  in  agriculture  it  is 
further  explained  applies  also  to  mining,  and  in  short  to 
all  the  primary  or  extractive  industries,  which  give  the 
character  of  wealth  to  what  was  not  before  wealth,  but 
not  to  those  secondary  or  subsequent  industries  which  add 
an  additional  increase  of  wealth  to  what  was  already 
wealth.  Thus  since  the  law  of  diminishing  productiveness 
in  agriculture  does  not  apply  to  the  secondary  industries, 
it  is  assumed  that  any  increased  application  of  labor  (and 
capital)  in  manufacturing  for  instance,  would  continue  to 
yield  a  proportionate  and  more  than  proportionate  return. 
And  as  conclusive  and  axiomatic  proof  of  this  law  of  di- 
minishing productiveness  in  agriculture,  it  is  said  that 
were  it  not  for  this  peculiar  law,  and  were  it,  on  the  con- 
trary (as  it  is  assumed  it  would  be  without  it),  the  fact 
that  additional  application  of  labor  would  result  in  a  pro- 
portionately increased  production  from  the  same  land, 
one  single  farm  would  suffice  to  raise  all  the  agricultural 
produce  required  to  feed  the  whole  population  of  England, 
of  the  United  States  or  any  other  country,  or  of  course, 
of  the  whole  world,  by  mere  increase  in  the  application  of 
labor. 

This  proposition  seems  to  have  been  generally  accepted 
by  professional  economists  as  a  valid  reductio  ad  absurdunij 
and  to  have  carried  the  same  weight  in  the  common 
thought  as  has  the  similar  proposition  of  the  general 
Malthusian  doctrine  that  if  increasing  population  did  not 
find  increasing  difficulty  in  getting  subsistence,  mankind 


338  THE  PRODUCTION  OF  WEALTH.          Book  III. 

would  in  a  little  while  be  able  only  to  find  standing-room 
on  one  another's  heads. 

But  analysis  will  show  that  this  logical  structure,  which 
economic  writers  have  deemed  so  strong  and  on  which 
they  have  so  confidently  built,  rests  upon  an  utter  misap- 
prehension ;  that  there  is  in  truth  no  special  law  of  dimin- 
ishing productiveness  applying  to  agriculture,  or  to  the 
extractive  occupations,  or  to  the  use  of  natural  agents, 
which  are  the  various  ways  which  the  later  writers  have 
of  sometimes  stating  what  the  earlier  writers  called  the  law 
of  diminishing  productiveness  in  agriculture;  and  that 
what  has  been  misapprehended  as  a  special  law  of  dimin- 
ishing returns  in  agriculture  is  in  reality  a  general  law, 
applying  as  well  to  manufacturing  and  exchanging  as  to 
agriculture,  being  in  fact  nothing  less  general  than  the 
spacial  law  of  all  material  existence  and  movement— inor- 
ganic as  well  as  organic. 

This  will  appear  if  we  consider  the  relation  of  space  to 
production.  But  to  do  this  thoroughly  and  at  the  same 
time  to  clear  the  way  for  considerations  which  may  prove 
of  importance  in  other  parts  of  this  work,  I  propose  to 
begin  by  endeavoring  to  fix  the  meaning  and  nature  of 
space  and  time. 


CHAPTER  V. 
OF  SPACE  AND  TIME. 

SHOWING  THAT  HUMAN  REASON  IS  ONE,  AND  SO  FAR  AS  IT 
CAN  GO  MAY  BE  RELIED  ON. 

Purpose  of  this  work — Of  metaphysics — Danger  of  thinking  of  words 
as  things— Space  and  time  not  conceptions  of  things  but  of  rela- 
tions of  things— They  cannot,  therefore,  have  independent  begin- 
ning or  ending — The  verbal  habit  which  favors  this  idea — How 
favored  by  poets  and  by  religious  teachers— How  favored  by  phi- 
losophers— Of  Kant — Of  Schopenhauer — Mysteries  and  antino- 
mies that  are  really  confusions  in  the  meaning  of  words — Human 
reason  and  the  eternal  reason— "Philosophers"  who  are  really 
word-jugglers. 

MY  purpose  in  this  work  is  to  explain  the  science  of 
political  economy  so  clearly  that  it  may  be  under- 
stood by  any  one  of  common  ability  who  will  give  to  it 
reasonable  attention.  I  wish  therefore  to  avoid,  as  far 
as  possible,  everything  that  savors  of  metaphysics.  For 
metaphysics,  which  in  its  proper  meaning  is  the  science  of 
the  relations  recognized  by  human  reason,  has  become  in 
the  hands  of  those  who  have  assumed  to  teach  it,  a  syno- 
nym for  what  cannot  be  understood,  conveying  to  common 
thought  some  vague  notion  of  a  realm  beyond  the  bounds 
of  ordinary  reason,  into  which  common  sense  can  venture 
only  to  shrink  helpless  and  abashed. 

Yet  to  trace  to  their  root  confusions  involved  in  current 
economic  teachings  and  to  clear  the  ground  for  a  coherent 

339 


340  THE  PRODUCTION  OF  WEALTH.          Book  III. 

political  economy,  it  is  necessary  to  fix  the  real  meaning 
of  two  conceptions  which  belong  to  metaphysics,  and  which 
are  beset  by  confusions  that  have  not  only  disturbed  the 
teaching  of  political  economy,  but  of  philosophy  in  the 
higher  sense.  These  conceptions  are  those  of  space  and 
time. 

All  material  existence  is  in  space  and  in  time.  Hence, 
the  production  of  wealth,  which  in  all  its  modes  consists  in 
the  bringing  about  by  human  exertion  of  changes  in  the 
place  or  relation  of  material  things,  so  as  to  fit  them  for 
the  satisfaction  of  human  desire,  involves  both  space  and 
time. 

This  may  seem  like  a  truism— a  fact  so  self-evident  as 
not  to  need  statement.  But  much  disquisition  has  been 
wasted  and  much  confusion  caused  by  the  failure  of  econ- 
omists to  keep  this  in  mind.  Hence,  to  start  from  firm 
foundations,  we  must  see  clearly  what  is  really  meant  by 
space  and  time.  Here  we  come  into  the  very  heart  of 
metaphysics,  at  a  point  where  the  teachings  of  what  passes 
for  the  highest  philosophy  are  most  perplexed  and  per- 
plexing. 

In  asking  ourselves  what  we  really  mean  by  space  and 
time,  we  must  have  a  care,  for  there  is  a  danger  that  the 
habitual  use  of  words  as  instruments  of  thought  may  lead 
to  the  error  of  treating  what  they  express  as  objects  of 
thought,  or  things,  when  they  really  express  not  things, 
but  only  the  qualities  or  relations  of  things.  This  is  one 
of  those  sources  of  error  which  Bacon  in  his  figurative 
classification  called  Idols  of  the  Forum.  Though  a  word 
is  a  thing,  in  the  sense  that  its  verbal  form  may  be  made 
an  object  of  thought,  yet  all  words  are  not  things  in  the 
sense  of  representing  to  the  mind  what  apart  from  mere 
verbal  form  may  be  made  an  object  of  thought.  To  clothe 
in  a  form  of  words  which  the  eye  and  ear  may  distinguish 
from  other  words,  yet  which  in  their  meaning  involve  con- 


Chap.  V.  OF   SPACE  AND  TIME.  341 

tradictions,  is  not  to  make  a  thing,  which  in  itself,  and 
aside  from  that  mere  verbal  form,  can  be  thought  of.  To 
give  a  name  to  a  form  of  words  implying  contradictions 
is  to  give  name  to  what  can  be  thought  of  only  verbally, 
and  which  in  any  deeper  sense  than  that  is  a  negation— 
that  is  to  say,  a  no  thing,  or  nothing. 

Yet  this  is  the  trick  of  much  that  to-day  passes  for  the 
most  profound  philosophy,  as  it  was  the  trick  of  Plato  and 
of  much  that  he  put  into  the  mouth  of  Socrates.  To  try 
it,  make  up  a  word  signifying  opposite  qualities,  such  as 
"lowhigh"  or  "  squareround,"  or  a  phrase  without  think- 
able meaning,  such  as  a  "  fourth  dimension  of  space."  In 
this  it  will  be  wisest  to  use  a  tongue  which  being  foreign 
to  the  vernacular  is  suggestive  of  learning.  Latin  or 
Greek,  has  long  been  used  for  this  purpose,  but  among 
English-speaking  people  German  will  now  do  as  well  if  not 
better,  and  those  who  call  themselves  Theosophists  have 
taken  Sanskrit  or  what  they  take  to  be  Sanskrit  very  satis- 
factorily. Now,  if  you  have  the  external  associations  of 
superior  penetration,  and  will  persist  for  a  while  in  seem- 
ing to  treat  your  new  word  or  phrase  as  if  you  were  really 
making  it  an  object  of  deep  thought,  you  will  soon  have 
others  persuading  themselves  to  think  that  they  also  can 
think  of  it,  until  finally,  if  it  get  the  scholastic  vogue,  the 
man  frank  enough  to  say  that  he  can  get  no  meaning  from 
it  will  be  put  down  as  an  ignorant  fellow  whose  education 
has  been  neglected.  This  is  really  the  same  trick  as  stand- 
ing on  a  street  and  gazing  into  the  sky,  as  if  you  saw 
something  unusual  there,  until  a  crowd  gathers  to  look 
also.  But  it  has  made  great  reputations  in  philosophy. 

Now,  in  truth,  when  we  come  to  analyze  our  apprehen- 
sions of  space  and  time,  we  see  that  they  are  conceptions, 
not  of  things  in  themselves  existing,  but  of  relations  which 
things  in  themselves  existing  may  hold  to  'each  other- 
space  being  a  relation  of  extension  or  place  between  one 


342  THE  PRODUCTION  OF  WEALTH.          BooTcIII. 

thing  and  other  things,  such  as  far  or  near,  hither  or 
thither;  and  time  being  a  relation  of  succession  between 
one  thing  and  other  things,  such  as  before  or  after,  now 
and  then.  To  think  of  space  we  must  necessarily  think 
of  two  points  in  place,  and  to  make  the  relation  of  exten- 
sion between  them  intelligible  to  our  minds,  we  must  also 
think  of  a  third  point  which  may  serve  as  a  measure  of 
this  relation.  To  think  of  time  we  must  necessarily  think 
of  two  points  in  appearance  or  disappearance,  and  to  make 
this  relation  of  sequence  between  them  intelligible  to  our 
minds,  we  must  also  think  of  some  third  point  which  may 
serve  as  a  measure  of  this  relation. 

Since  space  and  time  are  thus  not  existences,  but  ex- 
pressions of  the  relation  to  each  other  of  things  thought 
of  as  existing,  we  .cannot  conceive  of  their  having  begin- 
ning or  ending,  of  their  creation  or  annihilation,  as  apart 
from  that  of  the  things  whose  relation  they  express.  Space 
being  a  relation  of  extension  between  things  in  place,  and 
time  a  relation  of  succession  between  things  in  order  of 
appearance  or  duration,  the  two  words  properly  express 
relations  which,  like  the  relations  of  form  and  number 
with  which  mathematics  deals  in  its  two  branches  of  ge- 
ometry and  arithmetic,  are  expressive  of  actual  relation 
wherever  the  things  they  relate  to  have  actual  existence, 
and  of  potential  relation  wherever  the  things  they  relate 
to  have  merely  potential  existence.  We  cannot  think  of  a 
when  or  where  in  which  a  whole  was  not  equal  to  the  sum 
of  its  parts,  or  will  ever  cease  to  be ;  or  in  which  the  lines 
and  angles  of  a  square  were  not,  or  can  ever  cease  to  be, 
equal  to  each  other;  or  in  which  the  three  angles  of  a 
triangle  were  not,  or  can  ever  cease  to  be,  equal  to  two 
right  angles.  Nor  yet  can  we  think  of  a  when  or  where 
in  which  twice  one  did  not  make  two,  or  can  ever  cease  to 
do  so ;  and  twice  two  did  not,  or  will  ever  cease  to,  make 
four.  In  the  same  way  it  is  utterly  impossible  for  us  to 


Chap.  V.  OF   SPACE  AND  TIME.  34.3 

think  of  a  when  or  where  in  which  space  and  time  could 
begin  or  could  end,  as  apart  from  the  beginning  or  ending 
of  the  things  whose  relations  to  each  other  they  express. 
To  try  to  think  of  space  and  time  without  a  presumption 
of  things  whose  relations  to  each  other  are  thus  expressed, 
is  to  try  to  think  of  shadow  without  reference  to  substance. 
It  is  to  try  to  think  of  a  no  thing,  or  nothing— a  negation 
of  thought. 

This  is  perfectly  clear  to  us  when  we  attach  an  article 
to  the  noun  and  speak  of  "  a  space  "  or  "  the  space,"  or  of 
"  a  time  "  or  "  the  time,"  for  in  such  speech  the  relation  of 
one  thing  or  set  of  things  to  another  thing  or  set  of  things 
is  expressed  by  some  such  preposition  as  "  from,"  "  before," 
"  after  "  or  "  when."  But  when  the  noun  is  used  without 
the  article,  and  men  speak  of  space  by  itself  and  time  by 
itself  without  any  word  of  particularization  or  preposition 
of  relation,  the  words  have  by  the  usage  of  our  English 
tongue  the  meaning  of  all  space  or  space  in  general,  or 
all  time  or  time  in  general.  In  this  case  the  habit  of  re- 
garding words  as  denoting  things  in  themselves  existing 
is  apt  to  lead  us  to  forget  that  space  and  time  are  but 
names  for  certain  relations  in  which  things  stand  to  each 
other,  and  to  come  to  regard  them  as  things  which  in  them- 
selves, 'and  apart  from  the  things  whose  relationship  they 
express,  can  become  objects  of  thought.  Thus,  without 
analyzing  the  process,  we  come  to  accept  in  our  minds  the 
naked  words  as  representing  some  sort  of  material  exis- 
tences—vaguely picturing  space  as  a  sort  of  atmosphere  or 
ether,  in  which  all  things  swim,  and  time  an  ever-flowing 
current  which  bears  all  things  on. 

From  this  mode  of  mental  picturing  we  are  apt  to  assume 
that  both  space  and  time  must  have  had  beginning,  before 
which  there  was  no  space  and  no  time ;  and  must  have 
limits,  beyond  which  neither  space  nor  time  can  be.  But 
when  we  try  to  think  of  this  beginning  or  of  these  limits, 


344  THE  PRODUCTION  OF  WEALTH.          Book  III. 

we  think  of  something  which  for  the  moment  we  assume 
to  be  the  first  or  farthest  of  existing  things.  Yet  no 
matter  how  far  we  may  carry  this  assumption,  we  at  the 
same  moment  see  that  it  may  be  carried  further  still.  To 
think  of  anything  as  first,  involves  the  possibility  of  think- 
ing of  something  before  that,  to  which  our  momentary 
first  would  become  second.  To  think  of  an  utmost  star 
in  the  material  universe,  involves  the  possibility  of  think- 
ing of  another  star  yet  further  still. 

Thus  in  the  effort  to  grasp  such  material  conceptions  of 
time  and  space  they  inevitably  elude  us.  From  trying  to 
think  of  what  are  only  names  for  relations  which  things 
have  to  each  other  as  if  they  were  things  in  themselves, 
we  come  to  a  point  not  merely  of  confusion,  but  of  nega- 
tion—a conflict  of  absolutely  opposing  ideas  resembling 
that  brought  about  in  the  minds  of  the  unwary  by  the 
schoolmen's  question  as  to  what  would  happen  did  an 
irresistible  force  meet  an  immovable  body. 

Now,  this  way  of  using  the  nouns  space  and  time 
without  an  article,  as  though  they  mean  things  in  them- 
selves existing,  has  been  much  favored  by  the  poets,  whose 
use  of  words  is  necessarily  metaphorical  and  loose.  And 
it  has  been  much  favored  by  the  teachers  of  religion, 
whose  endeavor  to  embody  spiritual  truths  tends  to  poet- 
ical expression,  and  who  have  been  prone  in  all  ages  to 
make  no  distinction  between  the  attribution  to  the  higher 
power  of  what  transcends  our  knowledge  and  of  what  is 
opposed  to  our  reason— assuming  the  repugnance  of  human 
reason  to  accept  the  contradictions  to  which  they  give  the 
name  of  mysteries  to  be  proofs  of  its  weakness. 

Thus  the  habit  of  trying  to  think  of  space  and  time  as 
things  in  themselves  and  not  merely  relations  of  things, 
has  been  embedded  in  religious  literature,  and  in  our  most 
susceptible  years  we  hear  of  beings  who  know  not  space 
or  time,  and  of  whens  and  wheres  in  which  space  and  time 


Chap.  V.  OF   SPACE  AND  TIME.  345 

are  not.  And  as  the  child  recoils  from  the  impossible  at- 
tempt to  think  of  the  unthinkable  and  strives  in  vain  to 
picture  a  when  or  where  in  which  space  and  time  have 
not  been,  or  shall  cease  to  be,  he  is  hushed  into  silence 
by  being  told  that  he  is  impiously  trying  to  measure  with 
the  shallow  plummet  of  human  reason  the  infinite  depths 
of  the  Divine  Mind. 

But  the  disposition  of  the  theologians  to  find  an  insolv- 
able  mystery  in  the  contradiction  that  follows  the  attempt 
to  think  of  space  and  time  not  as  relations  but  as  inde- 
pendent existences,  has  been  followed  or  perhaps  antici- 
pated by  philosophers  who  in  the  use  of  meaningless  words, 
as  though  to  them  they  really  conveyed  coherent  ideas, 
have  assumed  what  has  passed  for  superior  penetration. 
They  (or  at  least  those  of  them  who  have  looked  down 
upon  the  theologians  with  contempt)  have  not,  it  is  true, 
called  the  inevitable  conflict  in  thought  which  arises  when 
we  try  mentally  to  treat  of  what  is  really  a  relation  as 
though  it  were  in  itself  a  thing,  a  divine  mystery.  But 
they  have  recognized  this  conflict  as  something  inherent, 
not  in  confusion  of  words,  but  in  the  weakness  of  human 
reason— which  human  reason  they  themselves  pretend  to 
go  behind  and  instruct. 

Kant,  whose  ponderous  incomprehensibility  is  a  striking 
example  of  what  (whether  it  was  before  him  or  because  of 
him)  seems  to  have  become  a  peculiarly  German  facility 
for  inventing  words  handy  for  philosophic  juggling,  dig- 
nified this  point  of  assumed  necessary  conflict  by  calling- 
it  an  "  antinomy,"  which  term  suggesting  in  its  derivation 
the  idea  of  a  conflict  of  laws,  was  employed  by  him  to 
mean  a  self-contradiction  or  mutual  destruction  of  una- 
voidable conclusions  of  the  human  reason ;  a  what  must 
be  thought  of,  yet  cannot  be  thought  of.  Thus  the  word 
antinomy  in  the  scholastic  philosophy  that  has  followed 
Kant  takes  the  place  of  the  word  mystery  in  the  theo- 


346  THE  PEODUCTION  OF  WEALTH.          Boole  III. 

logical  philosophy,  as  covering  the  idea  of  a  necessary 
irreconcilability  of  human  reason. 

Kant,  for  instance,  tells  us  that  space  and  time  are  forms 
of  human  sensibility,  which,  as  well  as  I  can  understand 
him,  means  that  our  mental  nature  imposes  upon  us  the 
wearing  of  something  like  colored  glasses,  so  that  when 
ive  consider  things  they  always  seem  to  us  to  be  in  space 
and  in  time  5  but  that  this  is  merely  their  appearance  to 
us,  and  that  "  things  in  themselves,"  that  is,  things  as  they 
really  exist  outside  of  our  sensibility  or  apprehension  of 
them,  or  as  they  would  be  apprehended  by  "pure  reason77 
(i.e.,  some  reason  outside  of  human  reason),  are  not  in 
space  and  time  at  all. 

In  a  passage  I  have  already  quoted,  the  much  more 
readable  Schopenhauer  speaks  of  the  destruction  of  the 
capacity  for  thinking  which  results  from  the  industrious 
study  of  a  logomachy  made  up  by  monstrous  piecings  to- 
gether of  words  which  abolish  and  contradict  one  another. 
But  of  this  very  thing,  Schopenhauer  himself  with  all  his 
strength  and  brilliancy  is  a  notable  example.  His  indus- 
trious study  of  Kant  had  evidently  reduced  him  to  that 
state  of  mind  of  which  he  speaks,  where  "  hollow  phrases 
count  with  it  for  thoughts.77  His  whole  philosophy  is 
based  on  Kant7s  "Critique  of  Pure  Reason,77  which  he 
speaks  of  as  "the  most  important  phenomenon  that  has 
appeared  in  philosophy  for  two  thousand  years,77  and  a 
thorough  understanding  of  which  he  declares  in  the  be- 
ginning and  over  and  over  again  to  be  absolutely  neces- 
sary to  an  understanding  of  his  own  works.  Likening  the 
effect  of  Kant7s  writings  on  the  mind  to  which  they  truly 
speak  to  that  of  the  operation  for  cataract  on  a  blind  man, 
he  adds : 

The  aim  of  my  own  work  may  be  described  by  saying  that  I  have 
sought  to  put  into  the  hands  of  those  upon  whom  that  operation  has 
been  successfully  performed  a  pair  of  spectacles  suitable  to  eyes  that 


Chap.  V.  OF  SPACE  AND  TIME.  347 

have  recovered  their  sight— spectacles  to  whose  use  that  operation  is 
the  absolutely  necessary  condition. 

And  through  these  spectacles  of  "  The  Fourfold  Root  of 
the  Principle  of  Sufficient  Reason  "  and  the  chief  work  to 
which  that  is  preliminary,  "  The  World  as  Will  and  Idea," 
Schopenhauer  introduces  us  into  what  seems  to  natural 
reason  like  a  sort  of  philosophic  "  Alice  in  Wonderland." 
If  I  can  understand  a  man  who  seems  to  have  a  peculiar 
gift  of  lucid  expression  wherever  it  is  applied  to  under- 
standable things,  and  whose  writings  are  illumined  by 
many  acute  observations  and  sagacious  reflections,  this 
world  in  which  I  find  myself  and  which  from  the  outside 
is  so  immense,  so  varied,  so  wonderful,  is  from  the  inside, 
nothing  but  "I,  myself  "—my  idea,  my  presentment,  my 
will  j  and  space  and  time  are  only  in  my  seeming,  appear- 
ances imposed  upon  me  by  the  forms  of  my  consciousness. 
I  behold,  for  instance,  a  kitten,  which  by  and  by  becomes 
a  cat  and  has  kittens  of  its  own,  and  at  the  same  time  or 
at  different  times  and  places  I  see  or  remember  to  have 
seen  many  cats— tom-cats,  pussy-cats,  kitty-cats,  black, 
white,  gray,  mottled  and  tortoise-shell  cats,  in  different 
stages  of  age,  from  little  cats  whose  eyes  are  not  yet  opened 
to  decrepit  cats  that  have  lost  their  teeth.  But  in  reality, 
on  the  inside  of  things  as  it  were,  there  is  only  one  cat, 
always  existent  without  reference  to  time  and  space.  This 
eternal  cat  is  the  idea  of  a  cat,  or  cat  idea,  which  is  reflected 
in  all  sorts  of  guises  in  the  kaleidoscopic  facets  of  my  ap- 
prehension. And  as  with  cats,  so  with  all  things  else  in 
which  this  infinite  and  varied  world  presents  itself  to  me 
—planets  and  suns,  plants  and  trees,  animals  and  men, 
matter  and  forces,  phenomena  and  laws.  All  that  I  see, 
hear,  touch,  taste,  smell  or  otherwise  apprehend— all  is 
mirage,  presentment,  delusion.  It  is  all  the  baseless  fab- 
ric of  a  vision,  the  self-imposed  apprehensions  of  the  evil 
dream,  containing  necessarily  more  pain  than  pleasure,  in 


348  THE  PRODUCTION  OF  WEALTH.          Boole  III. 

which  what  we  call  life  essentially  consists ;  yet  which  he 
who  suffers  in  it  cannot  escape  by  suicide,  since  that  only 
brings  him  into  life  again  in  other  form  and  circumstance ; 
but  from  which  the  truly  wise  man  must  seek  relief  by 
starving  himself  to  death  without  wanting  to  die  j  or  in 
other  words  by  conquering  "the  will  to  live,"  the  only 
road  to  the  final  goal  of  annihilation  or  Nirvana,  to  which 
all  life  ultimately  tends. 

And  this  philosophy  of  negation,  this  nineteenth- cen- 
tury Buddhism  without  the  softening  features  of  its  Asiatic 
prototype,  that  makes  us  but  rats  in  an  everlasting  trap, 
and  substitutes  for  God  an  icy  devil,  is  the  outcome  of 
the  impression  made  upon  a  powerful  and  brilliant  but 
morbid  mind  by  "the  industrious  study  of  a  logomachy 
made  up  by  monstrous  piecings  together  of  words  which 
abolish  and  contradict  one  another,"  that  strives  to  turn 
human  reason  as  it  were  inside  out  and  consider  in  the 
light  of  what  is  dubbed  "pure  reason"  the  outside-in  of 
things. 

The  fact  is,  that  this  seemingly  destructive  conflict  of 
thought  that  theologians  call  a  mystery  and  philosophers 
call  an  antinomy— and  which  there  must  be  very  many  of 
my  readers  who  like  myself  can  remember  puzzling  over 
in  childhood  in  questionings  of  what  might  be  beyond  the 
limits  of  space  and  time,  and  what  was  before  God  was, 
and  what  might  be  after  space  and  time  had  ceased— is  not 
in  reality  a  failure  of  reason,  but  a  confusion  in  the  mean- 
ing of  words.  When  we  remember  that  by  space  and  time 
we  do  not  really  mean  things  having  existence  but  certain 
relations  to  each  other  of  things  that  have  existence,  the 
mystery  is  solved  and  the  antinomy  disappears  in  the 
perception  of  a  verbal  confusion— a  confusion  of  the  same 
kind  as  perplexes  those  who  try  to  think  at  once  of  an 
irresistible  force  and  an  immovable  body,  two  terms  which 
being  mutually  exclusive  cannot  together  exist. 


Chap.  V.  OF  SPACE  AND  TIME.  349 

There  is  a  riddle  about  what  a  boy  said,  sometimes  given 
among  young  people  playing  conundrums,  which  if  not 
heard  before,  is  almost  certain  to  make  the  whole  party 
"  give  it  up,"  after  trying  all  sorts  of  impossible  answers, 
since  its  true  and  only  possible  answer,  "  The  boy  lied,"  is 
so  obvious  that  they  do  not  think  of  it. 

We  may  be  wise  to  distrust  our  knowledge  ;  and,  unless 
we  have  tested  them,  to  distrust  what  we  may  call  our 
reasonings ;  but  never  to  distrust  reason  itself. 

Even  when  we  speak  of  lunacy  or  madness  or  similar 
mental  afflictions  as  the  loss  of  reason,  analysis  I  think 
will  show  that  it  is  not  reason  itself  that  is  lost,  but  that 
those  powers  of  perception  and  recollection  that  belong  to 
the  physical  structure  of  the  mind  have  become  weakened 
or  broken  or  dislocated,  so  that  the  things  with  which  the 
reason  deals  are  presented  to  it  imperfectly  or  in  wrong 
place  or  relation. 

In  testing  for  glasses  an  optician  will  put  on  you  lenses 
through  which  you  will  see  the  flame  of  a  candle  above  or 
below  or  right  or  left  of  its  true  position,  or  as  two  where 
there  is  only  one.  It  is  so  with  mental  diseases. 

And  that  the  powers  with  which  the  human  reason  must 
work  are  limited  and  are  subject  to  faults  and  failures, 
our  reason  itself  teaches  us  as  soon  as  it  begins  to  examine 
what  we  find  around  us  and  to  endeavor  to  look  in  upon 
our  own  consciousness.  But  human  reason  is  the  only 
reason  that  men  can  have,  and  to  assume  that  in  so  far  as 
it  can  see  clearly  it  does  not  see  truly,  is  in  the  man  who 
does  it  not  only  to  assume  the  possession  of  a  superior  to 
human  reason,  but  it  is  to  deny  the  validity  of  all  thought 
and  to  reduce  the  mental  world  to  chaos.  As  compared 
with  the  eternal  reason  which  is  manifested  in  the  relations 
which  we  call  laws  of  nature  our  human  reason  is  clearly 
shallow  and  narrow ;  but  that  it  is  a  perception  and  recog- 
nition of  this  eternal  reason  is  perhaps  the  deepest  fact  of 


350  THE  PEODUCTION   OF  WEALTH.          Book  III. 

our  certainty.  Not  as  yet  dreaming  that  this  earth  which 
seems  to  our  first  perceptions  to  be  so  firmly  fixed  could 
be  in  constant  motion,  men  did  not  for  a  long  time  perceive 
what  a  closer  and  wider  use  of  reason  now  shows  to  be  the 
case,  that  the  earth  revolves  around  the  sun,  not  the  sun 
around  the  earth,  and  spoke  with  literal  meaning  of  sunrise 
and  sunset.  But  as  to  the  phenomena  of  day  and  night, 
and  as  to  the  proximate  cause  of  these  phenomena  being 
in  the  relations  of  sun  and  earth  towards  each  other,  they 
were  not  deceived. 

As  for  the  philosophers  since  Kant  or  before  him  who 
profess  to  treat  space  and  time  as  mere  conditions  of  human 
perception,  mental  glasses,  as  it  were,  that  compel  us  to 
recognize  relations  that  do  not  in  truth  exist,  they  are  mere 
jugglers  with  words,  giving  names  such  as  "  the  absolute," 
"  the  unconditioned/7  "  the  unknowable  "  to  what  cannot  be 
thought  of,  and  then  proceeding  to  treat  them  as  things, 
and  to  reason  with  them  and  from  them. 


CHAPTER  VI. 

CONFUSION  OF  THE   SPACIAL  LAW  WITH 
AGRICULTURE. 

SHOWING  THE  GENESIS  OF  THIS  CONFUSION. 

What  space  is  —  The  place  to  which  man  is  confined  —  Extension  a 
part  of  the  concept  "  land  "—Perception  is  by  contrast— Man's 
first  use  of  land  is  by  the  mode  of  "adapting" — His  second,  and 
for  a  long  time  most  important,  use  is  by  "growing"— The  third, 
on  which  civilization  is  now  entering,  is  "exchanging"— Political 
economy  began  in  the  second,  and  "  growing  "  still  attracts  most 
attention— The  truth  and  error  of  the  Physiocrats— The  succes- 
sors of  Smith,  while  avoiding  the  error  of  the  Physiocrats,  also 
ignored  their  truth ;  and  with  their  acceptance  of  the  Malthusian 
theory,  and  Eicardo's  explanation  of  rent  as  relating  to  agricul- 
tural land,  they  fell  into,  and  have  continued  the  habit  of  treating 
land  and  rent  as  agricultural— Difficulty  of  the  single  tax  in  the 
United  States. 

THE  laws  of  our  physical  being,  to  which  I  have  already 
called  attention  (Book  I.,  Chapter  II.),  confine  us 
within  narrow  limits  to  that  part  of  the  superficies  of  our 
sphere  where  the  ocean  of  air  enveloping  it  meets  the  solid 
surface.  We  may  venture  temporarily  a  little  below  the 
solid  surface,  in  caves  and  vaults  and  shafts  and  tunnels ; 
and  a  little  above  it,  on  trees,  or  towers,  or  in  balloons  or 
aerial  machines,  if  such  be  yet  constructed;  but  with 
these  temporary  aerial  extensions  of  our  habitat,  which  of 
themselves  require  not  only  a  preliminary  but  a  recurring 
use  of  the  solid  surface  of  the  earth,  it  is  to  that  solid 

351 


352  THE  PRODUCTION  OF  WEALTH.          Book  111. 

surface  that  our  material  existence  and  material  produc- 
tion are  confined.  Physically  we  are  air-breathing,  light- 
requiring  land  animals,  who  for  our  existence  and  all  our 
production  require  place  on  the  dry  surface  of  our  globe. 
And  the  fundamental  perception  of  the  concept  land— 
whether  in  the  wider  use  of  the  word  as  that  term  of 
political  economy  signifying  all  that  external  nature  offers 
to  the  use  of  man,  or  in  the  narrower  sense  which  the  word 
usually  bears  in  common  speech,  where  it  signifies  the 
solid  surface  of  the  earth— is  that  of  extension  j  that  of 
affording  standing-place  or  room. 

But  a  fundamental  perception  is  not  always  a  first  per- 
ception. Weight  is  a  fundamental  perception  of  air. 
But  we  realize  this  only  by  the  exertion  of  reason,  and 
long  generations  of  men  have  lived,  feeling  the  weight  of 
air  on  every  part  of  their  bodies  during  every  second  of 
their  lives  from  birth  to  death,  without  ever  realizing  that 
air  has  weight.  Perception  is  by  contrast.  What  we 
always  perceive  neither  attracts  attention  nor  excites 
memory  until  brought  into  contrast  with  non-perception. 

Even  in  the  now  short  Atlantic  trip  the  passenger  be- 
comes so  accustomed  to  the  constant  throb  of  the  engines 
as  not  to  notice  it,  but  is  aroused  by  the  silence  when  it 
stops.  The  visitor  in  a  nail-mill  is  so  deafened  that  speech 
seems  impossible  j  but  the  men  working  there  are  said  to 
talk  to  each  other  without  difficulty  and  to  find  conversa- 
tion hard  when  they  get  again  into  the  comparative  silence 
of  the  street.  In  later  years,  I  have  at  times  "  supped  with 
Lucullus,"  without  recalling  what  he  gave  me  to  eat, 
whereas  I  remember  to  this  day  the  ham  and  eggs  of  my 
first  breakfast  on  a  canal-packet  drawn  by  horses  that 
actually  trotted;  how  sweet  hard-tack,  munched  in  the 
middle  watch  while  the  sails  slept  in  the  trade-wind,  has 
tasted  j  what  a  dish  for  a  prince  was  sea-pie  on  the  rare 


Chap.  VI.        CONFUSION  OF  THE  SPACIAL  LAW.  353 

occasions  when  a  pig  had  been  killed  or  a  porpoise  har- 
pooned ;  and  how  good  was  the  plum-duff  that  came  to  the 
forecastle  only  on  Sundays  and  great  holidays.  I  remember 
as  though  it  were  an  hour  ago,  that  talking  to  myself 
rather  than  to  him,  I  said  to  a  Yorkshire  sailor  on  my  first 
voyage,  "  I  wish  I  were  home,  to  get  a  piece  of  pie."  I 
recall  his  expression  and  tone,  for  they  shamed  me,  as  he 
quietly  said,  "  Are  you  sure  you  would  find  a  piece  of  pie 
there  ? "  Thoughtless  as  the  French  princess  who  asked 
why  the  people  who  were  crying  for  bread  did  not  try 
cake,  "Home"  was  associated  in  my  mind  with  pie  of 
some  sort— apple  or  peach  or  sweet  potato  or  cranberry 
or  mince— to  be  had  for  the  taking,  and  I  did  not  for  the 
moment  realize  that  in  many  homes  pie  was  as  rare  a 
luxury  as  plums  in  our  sea-duff. 

Thus,  while  the  fundamental  quality  of  land  is  that  of 
furnishing  to  men  place  on  which  they  may  stand  or  move, 
or  rest  things  on,  this  is  not  the  quality  first  noticed.  As 
settlers  in  a  wooded  country,  where  every  foot  of  land 
must  be  cleared  for  use,  come  to  regard  trees  as  a  nuisance 
to  be  got  rid  of,  rather  than  as  the  source  of  value  that 
in  the  progress  of  civilization  they  afterwards  become,  so 
in  that  rude  stage  of  social  development  which  we  are 
accustomed  to  think  of  as  the  primary  condition  of  man- 
kind, where  the  mode  of  expending  labor  in  production 
which  most  attracts  attention  is  that  we  have  called 
"  adapting,"  land  would  be  esteemed  rich  or  poor  accord- 
ing to  its  capacity  of  yielding  to  labor  expended  in  this 
first  mode,  the  fruits  of  the  chase. 

In  the  next  higher  stage  of  social  development,  in  which 
that  second  mode  of  production,  which  we  have  called 
"growing,"  begins  to  assume  most  importance  in  social 
life,  that  quality  of  land  which  generally  and  strongly 
attracts  attention  is  that  which  makes  it  useful  in  agri- 


354  THE  PRODUCTION  OF  WEALTH.          Book  III. 

culture,  and  land  would  be  esteemed  rich  or  poor  accord- 
ing to  its  capacity  for  yielding  to  labor  expended  in  the 
breeding  of  animals  and  raising  of  crops. 

But  in  the  still  higher  stage  of  social  development  which 
what  we  now  call  the  civilized  world  is  entering,  attention 
begins  to  be  largely  given  to  the  third  mode  of  production, 
which  we  have  called  "  exchanging,"  and  land  comes  to  be 
considered  rich  or  poor  according  to  its  capacity  of  yield- 
ing to  labor  expended  in  trading.  This  is  already  the  case 
in  our  great  cities,  where  enormous  value  attaches  to  land, 
not  because  of  its  capacity  to  provide  wild  animals  to  the 
hunter,  nor  yet  because  of  its  capacity  to  yield  rich  crops 
to  the  grower,  but  because  of  its  proximity  to  centers  of 
exchange. 

That  the  development  of  our  modern  economy  began  in 
what  was  still  mainly  the  second  stage  of  social  develop- 
ment, when  the  use  of  land  was  usually  regarded  from  the 
agricultural  point  of  view,  is  it  seems  to  me,  the  explanation 
of  an  otherwise  curious  way  of  thinking  about  land  that 
has  pervaded  economic  literature  since  the  time  of  the 
Physiocrats,  and  that  still  continues  to  pervade  the  scho- 
lastic political  economy— a  way  of  thinking  that  leads 
economic  writers  to  treat  land  as  though  it  were  merely  a 
place  or  substance  on  which  vegetables  and  grain  may  be 
grown  and  cattle  bred. 

The  followers  of  Quesnay  saw  that  there  is  in  the  aggre- 
gate production  of  wealth  in  civilization  an  unearned  in- 
crement—an element  which  cannot  be  attributed  to  the 
earnings  of  labor  or  capital— and  they  gave  to  this  incre- 
ment of  wealth,  unearned  so  far  as  individuals  are  con- 
cerned, the  name  of  product  net  or  surplus  product.  They 
rightly  traced  this  unearned  or  surplus  product  to  land, 
seeing  that  it  constituted  to  the  owners  of  land  an  income 
or  return  which  remained  to  them  after  all  expenditure 
of  labor  and  investment  of  capital  in  production  had  been 


Chap.  VI.        CONFUSION  OF  THE  SPACIAL  LAW.  355 

paid  for.  But  they  fell  into  error  in  assuming  that  what 
was  indeed  in  their  time  and  place  the  most  striking  and 
prominent  use  of  land  in  production,  that  of  agriculture, 
was  its  only  use.  And  finding  in  agriculture,  which  falls 
into  that  second  mode  of  production  I  have  denominated 
"  growing/7  the  use  of  a  power  of  nature,  the  germinative 
principle,  essentially  different  from  the  powers  utilized  in 
that  first  mode  of  production  I  have  denominated  "  adapt- 
ing," they,  without  looking  further,  jumped  to  the  con- 
clusion that  the  unearned  increment  of  wealth  or  surplus 
net  sprang  from  the  utilization  of  this  principle.  Hence 
they  deemed  agriculture  the  only  productive  occupation, 
and  insisted  in  spite  of  the  absurdity  of  it  that  manufac- 
tures and  commerce  added  nothing  to  the  sum  of  wealth 
above  what  they  took  from  it,  and  that  the  agriculturist 
or  cultivator  was  the  only  real  producer. 

This  weakness  in  the  thinking  of  the  Physiocrats  and 
the  erroneous  terminology  that  it  led  them  to  use,  finally 
discredited  their  true  apprehensions  and  noble  teachings, 
unpalatable  as  they  necessarily  were  to  the  powerful 
interests  who  seemingly  profit  by  social  injustice,  until 
the  rise  with  the  publication  of  ''Progress  and  Poverty" 
of  the  new  Physiocrats,  the  modern  Single  Taxers  as  they 
now  call  themselves  and  are  being  called. 

But  the  economists  who  succeeded  Adam  Smith,  while 
they  avoided  the  error  into  which  the  Physiocrats  had 
fallen,  avoided  as  well  the  great  truth  of  which  this  had 
been  an  erroneous  apprehension,  and  greedily  accepting 
the  excuse  which  the  Malthusian  theory  offered  for  putting 
upon  the  laws  of  God  the  responsibility  for  the  misery  and 
vice  that  flow  from  poverty,  they  fell  into  and  have  con- 
tinued the  habit  of  regarding  land  solely  from  the  agri- 
cultural point  of  view,  thus  converting  what  is  really  the 
spacial  law  of  all  production  into  an  alleged  law  of  dimin- 
ishing production  in  agriculture.  Even  Ricardo,  who 


356  THE  PRODUCTION  OF  WEALTH.          Book  III. 

truly  though  very  narrowly  explained  the  law  of  rent, 
shows  in  all  his  arguments  and  illustrations  an  inability 
to  free  himself  from  thinking  of  land  as  relating  only  to 
agriculture,  and  of  rent  only  as  agricultural  rent.  And 
although  in  England  the  relative  importance  of  agriculture 
has  during  all  this  century  steadily  and  rapidly  declined, 
the  habit  of  thinking  of  land  as  a  place  or  substance  for 
agricultural  operations  is  still  kept  up.  Not  merely  is  the 
law  of  diminishing  production  in  agriculture  still  taught 
as  a  special  law  of  nature  in  the  latest  works  treated  as 
authoritative  in  colleges  and  universities,  but  in  speaking 
of  land  and  of  rent,  most  English  writers  will  be  found  to 
have  really  in  mind  agricultural  land  or  agricultural  rent. 
What  is  true  of  England  is  true  of  the  United  States 
except  so  far  as  the  influence  of  the  single  tax  has  been 
felt.  But  the  greatest  difficulty  which  the  single  tax  prop- 
aganda meets  in  the  United  States  is  the  wide-spread 
idea,  sedulously  fostered  by  those  who  should  know  better, 
that  non-agricultural  workers  have  no  interest  in  the  land 
question  and  that  concentrating  taxes  on  land  values 
means  increasing  the  taxes  of  farmers.  To  fostering  this 
fallacy  all  the  efforts  of  the  accredited  organs  of  education 
are  directed. 


CHAPTER  VII. 
THE  RELATION  OF  SPACE  IN  PRODUCTION. 

SHOWING  THAT  SPACE   HAS  RELATION  TO  ALL 
MODES  OF  PRODUCTION. 

Matter  being  material,  space  must  have  relation  to  all  production— 
This  relation  readily  seen  in  agriculture— The  concentration  of 
labor  in  agriculture  tends  up  to  a  certain  point  to  increase  and 
then  to  dimmish  production— But  it  is  a  misapprehension  to  attrib- 
ute this  law  to  agriculture  or  to  the  mode  of  "growing"— It 
holds  in  all  modes  and  sub-divisions  of  these  modes— Instances  : 
of  the  production  of  brick,  of  the  mere  storage  of  brick— Man 
himself  requires  space— The  division  of  labor  as  requiring  space 
—Intensive  and  extensive  use  of  land. 

PRODUCTION  in  political  economy  means  the  produc- 
tion of  wealth.  Wealth,  as  we  have  seen,  consists  in 
material  substances  so  modified  by  human  labor  as  to  fit 
them  for  the  satisfaction  of  human  desires.  Space,  there- 
fore, which  has  relation  to  all  matter,  must  have  relation 
to  all  production. 

This  relation  of  space  to  all  production  may  be  readily 
seen  in  agriculture,  which  is  included  in  that  mode  of 
production  we  have  called  "growing."  In  this,  the  con- 
centration of  labor  in  space  tends  up  to  a  certain  point  to 
increase  the  productiveness  of  labor;  but  the  point  of 
greatest  productiveness  attained,  any  further  concentration 
of  labor  would  tend  to  decrease  productiveness.  Thus,  if 
a  Robinson  Crusoe,  having  a  whole  island  on  which  to 

357 


358  THE  PRODUCTION  OF  WEALTH.          Boole  III. 

expend  his  labor,  were  to  plant  potatoes,  each  cutting  a 
hundred  yards  apart  from  every  other  cutting,  he  would 
necessarily  waste  so  much  labor  in  planting,  cultivating 
and  gathering  the  crop  that  the  return  compared  with  his 
exertion  would  be  very  small.  He  would  get  a  much  larger 
return  were  he  to  concentrate  his  labor  by  planting  his 
potatoes  closer;  and  this  increase  would  continue  as  he 
continued  to  exert  his  labor  in  lesser  space,  until  his  plants 
became  too  crowded,  and  the  growth  of  one  would  lessen 
or  prevent  that  of  another.  While  if  he  continued  the 
experiment  so  far  as  to  put  all  his  cuttings  in  one  spot  he 
would  get  no  greater  return  than  he  might  have  had  from 
the  planting  of  one,  and  perhaps  no  return  at  all. 

This  spacial  law  of  production  holds  good  of  course  in 
labor  exerted  conjointly,  as  in  labor  exerted  individually. 
On  a  given  area,  the  application  of  labor  to  the  growth  of 
a  crop  or  the  breeding  of  animals  may  sometimes  be 
increased  with  advantage,  the  exertion  of  two  men  pro- 
ducing more  than  twice  as  much  as  the  exertion  of  one 
man ;  that  of  four  men,  more  than  twice  as  much  as  the 
exertion  of  two ;  and  so  on.  But  this  increase  of  produc- 
tion with  increased  application  of  labor  to  any  given  area 
cannot  go  on  indefinitely.  A  point  is  reached  at  which 
the  further  application  of  labor  in  the  given  area,  though 
it  may  for  a  time  result  in  a  greater  aggregate  production, 
yields  a  less  proportionate  production,  and  finally  a  point 
is  reached  where  the  further  application  of  labor  ceases 
even  to  increase  the  aggregate  result. 

It  is  misapprehended  appreciation  of  this  law  in  so  far 
as  it  applies  to  agricultural  production,  which  has  led  to 
the  formulation  and  maintenance  in  economic  teaching  of 
what  is  called  "  the  law  of  diminishing  productiveness  in 
agriculture."  But  the  law  is  not  peculiar  to  agriculture 
nor  to  the  second  mode  of  production  which  I  have  called 
"  growing."  It  is  true  that  this  mode  of  production  con- 


Chap.  VII.     EELATION  OF  SPACE  IN  PRODUCTION. 

sists  in  the  utilization  in  aid  of  labor  of  the  power  of 
reproduction  which  characterizes  life,  and  that  living 
things  in  their  growth  and  expansion  require  more  space 
than  things  destitute  of  life.  The  plants  that  we  grow 
require  space  below  the  surface  of  the  ground  in  which  to 
expand  their  roots  and  drink  in  certain  constituents,  and 
space  above  the  surface  in  which  to  expand  their  leaves 
and  drink  in  air  and  light.  And  the  animals  that  we  breed 
require  space  for  their  necessary  movements.  But  though 
the  spacial  requirements  of  living  things  may  be  relatively 
greater  than  those  of  things  not  living,  they  are  no  less 
absolute  in  the  one  case  than  in  the  other.  That  two 
material  things  cannot  exist  in  the  same  space  is  no  more 
true  of  brutes  than  of  beets,  nor  of  beets  than  of  bricks. 

In  every  form  or  sub-division  of  its  three  modes  the 
exertion  of  human  labor  in  the  production  of  wealth 
requires  space  j  not  merely  standing  or  resting  space,  but 
moving  space— space  for  the  movements  of  the  human 
body  and  its  organs,  space  for  the  storage  and  changing 
in  place  of  materials  and  tools  and  products.  This  is  as 
true  of  the  tailor,  the  carpenter,  the  machinist,  the  mer- 
chant or  the  clerk,  as  of  the  farmer  or  stock-grower,  or  of 
the  fisherman  or  miner.  One  occupation  may  require 
more  elbow-room  or  tool-room  or  storage-room  than 
another,  but  they  all  alike  require  space,  and  so  must  come 
to  a  point  where  any  gain  from  concentrating  labor  in 
space  ceases,  and  further  concentration  results  in  a  pro- 
portionate lessening  of  product,  and  finally  in  an  absolute 
decline.  The  same  law,  first  of  increasing  and  then  of 
diminishing  returns,  from  the  concentration  of  labor  in 
space,  which  the  first  exponents  of  the  doctrine  of  dimin- 
ishing returns  in  agriculture  say  is  peculiar  to  that  occu- 
pation, and  its  latter  exponents  say  obtains  in  agriculture, 
and  in  the  extraction  of  limited  natural  agents,  such  as 
coal,  shows  itself  in  all  modes  of  production,  and  must 


360  THE  PRODUCTION  OF  WEALTH.          Book  III. 

continue  to  do  so,  even  did  we  discover  some  means  of 
producing  wealth  by  solidifying  atmospheric  air  or  an  all- 
pervading  ether,  which  some  modern  scientists  suppose. 
For  this  alleged  "  law  of  diminishing  returns  in  agricul- 
ture n  is  nothing  more  nor  less  than  the  spacial  law  of 
material  existence,  the  reversal  or  denial  of  which  is  abso- 
lutely unthinkable. 

To  see  this,  let  us  take  a  form  of  production  widely 
differing  from  that  of  agriculture— the  production  of  brick. 
Brick  is  usually  made  from  clay,  but  can  be  made  from  other 
inorganic  substances,  such  as  shale,  coal-dust,  marble-dust, 
slag,  etc.,  and  no  part  of  its  production  involves  any  use  of 
the  principle  of  increase  that  characterizes  life.  Nor  can 
any  of  the  substances  used  in  brickmaking  be  considered 
as  limited  natural  substances  or  agents  by  any  classification 
that  would  not  destroy  the  distinction  by  including  the 
whole  earth  itself  as  a  limited  natural  agent.  The  produc- 
tion of  brick  is  clearly  one  of  the  forms  of  production 
which  those  who  uphold  the  doctrine  of  "  diminishing 
returns  in  agriculture,"  or  in  its  extension  to  the  doctrine 
of  "  diminishing  returns  in  the  use  of  limited  natural 
agents,"  would  consider  a  form  of  production  that  can  be 
continued  indefinitely  by  the  increased  application  of  labor 
without  diminishing  returns. 

Yet  we  have  only  to  think  of  it  to  see  that  what  is  called 
the  law  of  diminishing  returns  in  agriculture  applies  to 
the  making  of  brick  as  fully  as  to  the  growing  of  beets. 
A  single  man  engaged  in  making  a  thousand  bricks  would 
greatly  waste  labor  if  he  were  to  diffuse  his  exertions  over 
a  square  mile  or  a  square  acre,  digging  and  burning  the 
clay  for  one  brick  here,  and  for  another  some  distance 
apart.  His  exertion  would  yield  a  much  larger  return 
if  more  closely  concentrated  in  space.  But  there  is  a 
point  in  this  concentration  in  space  where  the  increase 
of  exertion  will  begin  to  diminish  its  proportionate  yield. 


,  36 


Ckap.IX.  COOPERATION-ITS  TWO  WAYS.  377 

concentration  of  the  work  of  baking  bread  effects  a  great 
saving  of  labor  in  the  item  of  fuel  alone.  And  it  is  so 
with  other  items. 

The  saving  thus  made  by  the  concentration  of  work 
arises  not  only  from  physical  laws  but  from  mental  laws 
as  well.  All  our  doing  or  accomplishing  of  things,  except 
those  that  may  be  referred  to  instinct,  require  in  the  first 
place  the  exertion  of  conscious  thought.  We  see  this  in 
the  child  as  it  learns  to  walk,  to  talk,  to  read  and  write. 
We  see  this  as  adults  when  we  begin  to  do  things  new  to 
us,  as  to  speak  a  foreign  tongue,  to  write  shorthand,  or 
use  a  typewriter  or  a  bicycle.  But  as  we  do  the  same 
things  again  and  again,  the  mental  exertion  becomes  less 
and  less,  until  we  come  to  do  them  automatically  and 
without  consciously  thinking  of  how  we  do  them. 

Now  the  result  of  what  regarded  from  the  standpoint 
of  the  whole  or  industrial  organism  is  the  separation  of 
effort  or  division  of  labor  in  the  production  of  wealth, 
is  that  the  individual  does  fewer  things  but  does  them 
of tener.  It  is  thus  from  the  standpoint  of  the  individual 
the  concentration  of  effort  or  of  labor,  and  so  from  the 
standpoint  of  the  things  to  be  done  it  involves  a  similar 
concentration  in  place  and  time,  thus  securing  the  saving 
of  effort  or  increased  efficiency  of  exertion  which,  to  recur 
to  our  illustration,  comes  from  doing  one  thing  behind 
another  and  on  a  large  instead  of  on  a  small  scale. 

Thus,  when  instead  of  each  individual  or  each  family 
endeavoring  to  hunt,  fish,  obtain  vegetables,  build  habita- 
tions and  make  clothing  or  tools,  for  the  satisfaction  of 
their  own  needs,  some  devote  themselves  to  doing  one 
thing  and  some  to  doing  another  of  the  things  required 
for  the  satisfaction  of  the  general  needs,  what  is  the 
separation  of  function  from  the  standpoint  of  the  all  or 
industrial  whole  is  the  concentration  of  function  in  its 
units,  and  special  trades  and  vocations  are  developed. 


378  THE  PRODUCTION  OF  WEALTH.          Book  III. 

And  as  the  social  organism  grows  by  increase  in  numbers 
or  the  widening  of  the  circle  of  exchanges,  or  both,  this 
differentiation  of  function  between  its  units  tends  con- 
stantly to  increase,  augmenting  the  efficiency  of  the 
productive  powers  of  man  to  a  degree  to  which  we  can 
assign  no  limits,  and  of  which  the  marvelous  increase  in 
productive  power  which  so  strikingly  characterizes  our 
modern  civilization  affords  but  a  faint  forecast. 

In  civilized  society  where  the  division  of  labor  has  been 
carried  to  great  lengths,  we  are  so  used  to  it  that  it  is  hard 
to  realize  how  much  we  owe  to  it,  and  how  utterly  different 
our  lif  e  would  be  without  it.  But  as  one  tries  to  think  to 
what  we  should  be  reduced  without  division  of  labor,  he 
will  see  how  large  is  the  part  it  plays  in  the  production  of 
wealth— so  large,  indeed,  that  without  it  man  as  we  know 
him  could  not  exist.  Take  for  instance  the  providing  of 
clothing.  If  each  one  had  to  make  his  own  clothing  from 
the  raw  material,  he  could  get  nothing  better  than  leaves 
or  skins.  Even  with  all  the  advantages  which  the  division 
of  labor  gives  in  the  making  of  cloth,  of  needles,  thread, 
buttons,  etc.,  let  any  one  unused  to  it  set  himself  to  the 
making  of  a  garment.  He  will  soon  realize  how  hard  it 
is  to  make  the  first  one ;  how  much  easier  and  better  the 
second  is  made  than  the  first,  the  third  than  the  second, 
and  so  on,  until  the  process  ceases  to  require  thought  and 
becomes  automatic.  When  by  means  of  the  division  of 
labor,  the  making  of  clothing  is  so  far  concentrated  that 
the  clothing  for  some  dozens  or  scores  of  men  can  be  made 
together,  then  individuals  can  devote  themselves  solely  to 
the  making  of  clothes,  with  greatly  increased  economy. 
As  the  concentration  of  clothes-making  proceeds  further, 
and  the  making  of  clothes  for  hundreds,  thousands,  tens 
of  thousands,  and  even  hundreds  of  thousands  of  indi- 
viduals is  by  the  development  of  the  ready-made  clothing 
industry  brought  together,  greater  and  greater  economies 


Chap.  IX.  COOPERATION-ITS  TWO  WAYS.  379 

become  possible.  Separate  individuals  devote  themselves 
to  the  making  of  particular  garments,  and  then  to  the 
making  of  particular  parts  or  to  particular  processes. 
Instead  of  one  tailor  cutting  out  a  garment  with  a  pair 
of  shears  and  then  proceeding  to  make  it  in  all  its  parts, 
cutters  who  do  nothing  else  cut  out  scores  of  garments  at 
once  with  great  knives ;  the  operations  of  basting,  lining, 
buttonholing,  etc.,  are  performed  by  different  people  who 
devote  themselves  to  doing  these  things  alone,  and  whose 
work  is  aided  by  powerful  machines,  the  use  of  which 
becomes  possible  with  the  larger  scale  and  greater 
continuity  of  employment  this  concentration  permits. 

It  is  this  concentration  and  specialization  of  work,  with 
the  division  of  labor,  that  brings  about  the  development  of 
labor-saving  machinery  of  all  kinds.  The  essential  quality 
of  the  machine  is  its  adaptation  for  the  doing  of  certain 
special  things.  The  human  body  considered  as  a  machine 
is  of  all  machines  that  which  is  best  adapted  for  the  doing 
of  the  greatest  variety  of  things.  But  for  doing  only  one 
thing,  for  the  increase  of  quantity  at  the  expense  of  variety, 
man  is  able  to  make  machines  which  within  a  narrow 
range  are  far  superior  to  the  tools  nature  gives  him.  And 
the  same  principle  governs  the  employment  of  forces  other 
than  the  force  he  can  command  in  his  muscles.  The 
utilization  of  winds  and  tides  and  currents  and  falling 
streams,  of  steam  and  of  electricity,  and  chemical  attrac- 
tions and  repulsions,  is  dependent  on  this  concentration. 

Thus  the  division  of  labor  involves  and  proceeds  from 
the  concentration  of  effort  for  the  satisfaction  of  desires. 
It  begins  when  there  are  two  individuals  who  cooperate  j 
it  increases  and  becomes  productive  of  greater  and  greater 
economies  with  the  increase  of  the  number  who  thus 
cooperate. 

Adam  Smith,  who  begins  his  "  Wealth  of  Nations"  by 
considering  how  cooperation  increases  the  productive 


380  THE  PEODUCTION  OF  WEALTH.          Book  III. 

powers  of  mankind,  which  he  styles  "the  division  of 
labor,"  refers  to  the  economy  which  it  produces  under 
three  heads : 

1.  The  increased  dexterity  of  workmen. 

2.  The  saving  of  time  by  the   greater  continuity  of 
employment. 

3.  The  economy  effected  by  the  use  of  machinery. 
But  on  a  larger  and  fuller  survey  we  may  perhaps  best 

analyze  the  advantages  that  result  from  the  cooperation 
of  labor  as  follows : 

A.  The  combination   of  labor  permits  a  number  of 
individuals  by  direct  union  of  their  powers  to  accomplish 
what  severally  would  be  impossible. 

B.  The  division  of  labor,  with  the  concentration  and 
cooperation  it  involves,  permits  the  doing  for  many  (or  a 
larger  number)  of  what  may  with  a  less  expenditure  be 
done  by  one  (or  by  a  smaller  number) : 

1.  By  the  saving  of  time  and  effort,  as  in  the  preceding 
illustration,  where  one  man  goes  on  a  journey  which  to 
accomplish  severally  four  men  would  have  to  make. 

2.  By  utilizing  the  differing  powers  of  individuals,  as 
where  those  who  excel  in  physical  strength  devote  them- 
selves to  things  requiring  physical  strength,  while  those 
who  are  inferior  in  physical  strength  do  the  things  which 
require  less  physical  strength,  but  for  which  they  are 
otherwise  just  as  capable,  thus  producing  the  same  net 
results  as  would  a  bringing  up  of  all  to  the  highest  level 
of  physical  strength ;  or  where  those  who  excel  in  other 
qualities  do  the  things  for  which  such  qualities  are  best 
adapted,  thus  practically  bringing  up  the  level  of  the 
accomplishment  of  all  to  that  of  the  highest  qualities  of 
each. 

3.  By  increasing  skill,  consequent  upon  those  who  do  a 
larger  amount  of  that  same  kind  of  work  being  able  to 
acquire  facility  in  it. 


Chap.  IX.  COOPERATION-ITS  TWO  WAYS.  381 

4.  By  accumulating  knowledge.     The  same  tendency 
which  increases  the  incommunicable  knowledge   called 
skill,  also  tends  to  increase  the  communicable  knowledge 
properly  so  called,  which  consists  in  a  knowing  of  the 
relations  of  things  to  other  external  things,  and  which 
constitutes  a  possession  of  the  economic  body  or  Greater 
Leviathan,  transferable  by  writing  or  similar  means. 

5.  By  utilizing  the  advantages  of  doing  things  on  a 
large  scale  instead  of  on  a  small  scale,  and  of  doing  them 
successively  instead  of  separately. 

6.  By  utilizing  the  natural  forces,  and  by  the  invention 
and  use  of  machines  and  of  improved  processes,  for  the 
use  of  which  the  large  scale  of  production  gives  advan- 
tages. 


CHAPTER  X. 
COOPERATION-ITS  TWO  KINDS. 

SHOWING  THE  TWO  KINDS  OF  COOPERATION,  AND  HOW  THE 
POWER  OF  THE  ONE  GREATLY  EXCEEDS  THAT  OF  THE 
OTHER. 

The  kind  of  cooperation  which,  as  to  method  of  union  or  how  of 
initiation,  results  from  without  and  may  be  called  directed  or  con- 
scious cooperation — Another  proceeding  from  within  which  may 
be  called  spontaneous  or  unconscious  cooperation— Types  of  the 
two  kinds  and  their  analogues — Tacking  of  a  full-rigged  ship  and 
of  a  bird — Intelligence  that  suffices  for  the  one  impossible  for  the 
other— The  savage  and  the  ship— Unconscious  cooperation  re- 
quired in  ship-building — Conscious  cooperation  will  not  suffice  for 
the  work  of  unconscious — The  fatal  defect  of  socialism — The 
reason  of  this  is  that  the  power  of  thought  is  spiritual  and  cannot 
be  fused  as  can  physical  force— Of  "man  power"  and  "mind 
power" — Illustration  from  the  optician — Impossibility  of  social- 
ism—Society a  Leviathan  greater  than  that  of  Hobbes. 

WE  have  seen  that  there  are  two  ways  or  modes  in 
which  cooperation  increases  productive  power.  If 
we  ask  how  cooperation  is  itself  brought  about,  we  see 
that  there  is  in  this  also  a  distinction,  and  that  cooperation 
is  of  two  essentially  different  kinds.  The  line  of  distinc- 
tion as  to  what  I  have  called  the  ways  of  cooperation,  and 
have  in  the  last  chapter  considered,  is  as  to  the  method  of 
action  or  how  of  accomplishment ;  the  line  of  distinction 
as  to  what  I  shall  call  the  kinds  of  cooperation,  and  am 

382 


Chap.  X.  COOPERATION-ITS  TWO  KINDS.  383 

about  in  this  chapter  to  consider,  is  as  to  the  method  of 
union  or  how  of  initiative. 

There  is  one  kind  of  cooperation,  proceeding  as  it  were 
from  without,  which  results  from  the  conscious  direction 
of  a  controlling  will  to  a  definite  end.  This  we  may  call 
directed  or  conscious  cooperation.  There  is  another  kind 
of  cooperation,  proceeding  as  it  were  from  within,  which 
results  from  a  correlation  in  the  actions  of  independent 
wills,  each  seeking  but  its  own  immediate  purpose,  and 
careless,  if  not  indeed  ignorant,  of  the  general  result.  This 
we  may  call  spontaneous  or  unconscious  cooperation. 

The  movement  of  a  great  army  is  a  good  type  of 
cooperation  of  one  kind.  Here  the  actions  of  many 
individuals  are  subordinated  to  and  directed  by  one 
conscious  will,  they  becoming,  as  it  were,  its  body  and 
executing  its  thought.  The  providing  of  a  great  city 
with  all  the  manifold  things  which  are  constantly  needed 
by  its  inhabitants  is  a  good  type  of  cooperation  of  the 
other  kind.  This  kind  of  cooperation  is  far  wider,  far 
finer,  far  more  strongly  and  delicately  organized,  than  the 
kind  of  cooperation  involved  in  the  movements  of  an 
army,  yet  it  is  brought  about  not  by  subordination  to  the 
direction  of  one  conscious  will,  which  knows  the  general 
result  at  which  it  aims ;  but  by  the  correlation  of  actions 
originating  in  many  independent  wills,  each  aiming  at  its 
own  small  purpose  without  care  for  or  thought  of  the 
general  result. 

The  one  kind  of  cooperation  seems  to  have  its  analogue 
in  those  related  movements  of  our  body  which  we  are  able 
consciously  to  direct.  The  other  kind  of  cooperation 
seems  to  have  its  analogue  in  the  correlation  of  the 
innumerable  movements,  of  which  we  are  unconscious, 
that  maintain  the  bodily  frame— motions  which  in  their 
complexity,  delicacy  and  precision  far  transcend  our 
powers  of  conscious  direction,  yet  by  whose  perfect 


384  THE  PRODUCTION  OF  WEALTH.          Bool:  III. 

adjustment  to  each  other  and  to  the  purpose  of  the  whole 
that  cooperation  of  part  and  function  that  makes  up  the 
human  body  and  keeps  it  in  life  and  vigor  is  brought 
about  and  supported. 

A  beautiful  instance  of  cooperation  of  the  first  kind  is 
furnished  by  the  tacking  of  a  square-rigged  ship  under 
full  sail.  The  noble  vessel,  bending  gracefully  to  the 
breeze,  under  her  cloud  of  canvas,  comes  driving  along, 
cleaving  white  furrows  at  her  bow  and  leaving  a  yeasty 
wake  at  her  stern.  Suddenly  her  jibs  fly  free  and  her 
spanker  flattens,  as  she  curves  towards  the  wind;  her 
foreyards  round  in  and  their  sails  begin  to  shake,  and  at 
length,  as  what  were  their  weather  braces  are  hauled 
taut,  to  fill  on  the  other  side.  The  after  sails  that  at  first 
held  the  wind  as  before,  begin  in  their  turn  to  spill;  then 
their  yards  are  shifted,  and  they  too  take  the  wind  on  a 
different  side ;  and  with  every  sheet  and  tack  in  its  new 
place  the  vessel  gathering  again  her  deadened  headway, 
begins  to  drive  the  foam  from  her  bow  as  she  bends  on  the 
other  side  to  cut  her  way  in  a  new  direction.  So  har- 
monious are  her  movements,  so  seemingly  instinct  with 
life,  that  the  savage  who  sees  for  the  first  time  such  a 
vessel  beating  along  the  coast  might  take  her  for  a  great 
bird,  changing  its  direction  with  the  movement  of  its 
wings  as  do  sea-gull  and  albatross. 

And  between  ship  and  bird  there  are  certain  resem- 
blances. Both  are  structures  in  which  various  parts  are 
combined  into  a  related  whole  and  distinct  motions  are 
correlated  in  harmonious  action.  And  in  both  movement 
is  produced  by  the  varying  angles  at  which  flat  surfaces 
are  by  a  mechanism  of  joints  and  ligaments  exposed  to 
the  impact  of  air.  In  a  bird,  however,  the  parts  in  their 
motions  obey  instinctively  and  unconsciously  the  prompt- 
ings of  the  conscious  will.  But  in  the  ship  the  motions  of 
the  parts  are  produced  by  the  distinct  action  of  a  number 


Chap.  X.  COOPERATION -ITS  TWO  KINDS.  385 

of  conscious  wills,  ranging  from  one  or  two  dozen  in  a 
merchant  vessel  to  several  hundred  in  an  old-fashioned 
ship  of  war.  Their  cooperation  is  produced,  not  in- 
stinctively and  unconsciously,  but  by  intelligent  obedience 
to  the  intelligent  orders  of  one  directing  will,  which 
prescribes  to  every  man  his  place  and  function,  directing 
when,  how,  and  by  whom,  each  motion  shall  be  made. 
The  bird  veers,  because  when  it  wills  to  veer,  nerve  and 
tendon  directly  respond  with  the  necessary  motions.  The 
ship  tacks  because  the  separate  wills  that  manage  her 
rudder  and  sails  consciously  obey  the  successive  commands 
which  prescribe  each  of  the  necessary  motions  from  the 
first  order,  «  Full  for  stays  !  »  to  the  last,  "  Belay  aU !  »  A 
series  of  intelligent  directions,  consciously  obeyed  by  those 
to  whom  they  are  addressed,  bring  about  and  correlate  the 
movements  of  the  parts. 

Nor  could  the  maneuvers  of  a  ship  be  carried  on  without 
such  intelligent  direction.  Any  attempt  to  substitute 
independent  action,  no  matter  how  willing,  for  responsive 
obedience  to  intelligent  direction  would  be  certain  ere 
long  to  result  as  in  the  traditional  coasting  schooner, 
manned  by  two— captain  and  mate— where  the  captain 
who  was  steering,  irritated  by  some  gratuitous  advice  of 
the  mate  who  was  tending  jib-sheets,  yelled  out  to  him, 
"  You  run  your  end  of  this  schooner  and  I'll  run  mine  !  " 
Whereupon  there  was  a  rattle  of  chain  at  the  bow,  and  the 
mate  yelled  back,  "  Captain,  I've  anchored  my  end  of  this 
schooner ;  you  can  run  your  end  where  you  choose !  n 

Now,  much  of  the  cooperation  of  man  in  producing 
social  effects  is  of  the  nature  of  that  by  which  a  ship  is 
sailed.  It  involves  the  delegation  to  individuals  of  the 
power  of  arranging  and  directing  what  others  shall  do, 
thus  securing  for  the  general  action  the  advantages  of 
one  managing  and  correlating  intelligence.  But  while 
cooperation  of  this  kind  is  indispensable  to  producing 


386  THE  PRODUCTION  OF  WEALTH.          Book  III. 

certain  results  by  conjoined  action,  it  is  helpless  or  all  but 
helpless  to  bring  about  certain  other  results  involving  a 
longer  series  and  more  complicated  and  delicate  actions 
and  adjustments. 

To  continue  our  illustration :  The  bird  structurally  is 
a  machine  as  the  ship  is  a  machine,  which  the  conscious 
will  of  the  bird,  controlling  certain  voluntary  movements, 
causes  to  rise  or  fall,  to  sweep  in  this  direction  or  in  that, 
to  be  carried  with  the  gale  or  to  tack  in  its  teeth,  in  short 
to  execute  all  the  movements,  sometimes  swift  and  some- 
times slow,  but  nearly  always  graceful,  of  which  this  bird 
machine  is  capable.  But  the  conscious  will  that  controls 
the  voluntary  motions  of  the  bird ;  the  intelligence  that  is 
the  captain  of  this  aerial  craft,  will  not  account  for  the 
machine  itself  j  for  its  consummate  arrangements  and 
adjustments  and  adaptions.  These  not  merely  infinitely 
transcend  the  intelligence  of  the  bird,  but  of  the  highest 
human  intelligence.  The  union  of  lightness  with  strength, 
of  rigidity  with  flexibility,  of  grace  with  power ;  the  appro- 
priateness of  material,  the  connection  and  relation  of  parts, 
the  economies  of  space  and  energy  and  function,  the 
applications  of  what  are  to  us  the  most  complex  and 
recondite  of  physical  laws,  make  the  bird  as  a  machine,  as 
far  superior  to  the  best  and  highest  machines  of  man's 
construction,  as  the  paintings  of  the  great  master  are  to 
the  rude  slate-drawings  of  the  prattling  child. 

The  bird  is  not  a  construction  as  man's  machines  are 
constructions.  It  was  not  built,  but  grew.  Its  first 
tangible  form,  as  far  as  we  can  trace  it,  was  a  limy  envelop 
containing  a  substance  called  the  yolk,  swimming  in  a 
sticky  fluid,  the  white.  Under  certain  conditions  and 
without  external  influence  except  that  of  gentle  and 
continued  heat,  the  molecules  of  the  contained  substance 
began,  by  some  influence  from  within,  and  seemingly,  of 
themselves,  to  range  themselves  into  cells,  and  cells  to 


CJiap.  X.  COOPERATION-ITS  TWO  KINDS.  387 

form  into  tissue  and  bone,  and  turning  in  related  order 
into  heart  and  lungs,  backbone  and  head,  stomach  and 
bowels,  brain  and  nerve,  wings  and  feet,  skin  and  feathers, 
until  at  length  a  tiny  living  thing  pecked  its  way  out, 
leaving  an  empty  shell,  and  with  a  little  eating  and  sleeping, 
a  little  hardening  of  gristle  and  lengthening  of  feathers, 
the  "  it "  of  it,  the  new  captain  of  the  new  air-ship,  began 
to  try  rudder  and  sails  and  paddles,  until  having  "  learned 
the  ropes,"  and  got  accustomed  to  the  measurement  of 
distance  and  the  "  feel "  of  motion,  it  started  off  boldly  to 
skim  and  to  soar,  to  get  food  and  digest  it,  to  live  its  life 
and  propagate  its  kind. 

The  veriest  savages  must  at  times  ponder  over  the 
mystery  of  the  egg,  as  we  civilized  men  at  times  ponder 
over  the  mystery  of  common  things— for  to  them  as  to  us 
it  would  be  an  insoluble  mystery.  But  it  is  the  ship, 
not  the  bird,  that  would  most  excite  their  wonder  and 
admiration,  for  the  savage  would  see  in  the  ship  as  soon 
as  he  came  close  to  it,  not  a  thing  that  grew,  but  a  thing 
that  was  made— a  higher  expression  of  the  same  power 
which  he  himself  exercises  in  his  own  rude  constructions. 
He  would  see  in  it,  when  he  came  to  look  closely,  but  a 
vastly  greater  and  better  canoe,  and  would  wonder  and 
admire  as  he  who  has  begun  to  paint  stands  in  wonder  and 
admiration  before  the  picture  of  a  master,  which  one  who 
knew  nothing  of  the  difficulties  of  the  art  would  pass  with 
little  notice.  As  the  savage  would  understand  the  kind  of 
cooperation  called  into  play  in  the  managing  of  a  vessel, 
so  would  he  attribute  the  building  of  the  vessel  to  coopera- 
tion of  the  same  kind.  Since  a  larger  canoe  than  one  man 
can  build  may  be  built  by  the  same  man  if  he  can  unite 
the  exertions  of  others  in  cutting,  rolling,  hewing  and 
hollowing  a  great  log,  so  would  it  seem  to  our  savage  that 
it  was  in  this  way  that  the  ship  of  civilization  was  built. 
And  the  admiration  which  the  ship  would  excite  in  him 


388  THE  PRODUCTION  OF  WEALTH.          Book  III. 

would  be  an  admiration  of  the  men  who  sailed  it,  whom 
he  would  naturally  take  to  be  the  men  who  built  it,  or  at 
least  to  be  men  who  could  build  it.  The  superiority  of 
the  ship  to  the  rude  canoes  with  which  he  was  familiar  he 
would  attribute  to  superiority  of  their  personal  qualities 
—their  greater  knowledge  and  skill  and  power.  They 
would  indeed  seem  to  him  at  first  as  very  gods. 

Yet  the  savage  would  be  wrong.  The  superiority  of  the 
ship  does  not  indicate  the  superiority  of  individual  men. 
If  driven  ashore  with  the  loss  of  their  ship  and  all  its 
contents,  these  men  would  be  more  helpless  than  so  many 
of  his  own  people,  and  would  find  it  more  difficult  to  make 
even  a  canoe.  Even  if  they  had  saved  tools  and  stores,  it 
would  be  only  after  long  toil  that  they  could  succeed  in 
building  some  rude,  small  craft  unfitted  for  a  long  voyage 
and  rough  weather,  and  not  in  any  respect  comparable  with 
their  ship.  For  a  modern  ship  is  rather  a  growth  than  a 
direct  construction  in  that  as  between  the  kind  of  coopera- 
tion required  for  its  production  and  that  which  suffices  for 
that  of  a  canoe,  there  is  a  difference  which  suggests  some- 
thing not  altogether  unlike  the  difference  between  a  work 
of  nature  and  a  work  of  man. 

The  cooperation  required  in  the  making  of  a  large 
canoe  or  in  the  sailing  of  a  ship  is  exceedingly  simple 
as  compared  to  that  involved  in  the  construction  and 
equipment  of  a  well-found,  first-class  ship.  The  actual 
putting  together,  according  to  the  plans  of  the  naval 
architect,  of  the  separate  parts  and  materials  which  com- 
pose such  a  ship,  would  require,  after  they  had  been 
assembled,  some  directed  cooperation.  But  if  cooperation 
of  this  kind  could  suffice  for  even  putting  the  parts 
together  after  they  had  been  made  and  assembled,  how 
could  it  suffice  for  making  those  various  parts  from  the 
forms  in  which  nature  offers  their  material,  and  assembling 
them  in  the  place  where  they  were  to  be  put  together  ? 


Cliap.  X.  COOPERATION-ITS  TWO  KINDS.  389 

Consider  the  timbers,  the  planks,  the  spars  ;  the  iron  and 
steel  of  various  kinds  and  forms  ;  the  copper,  the  brass, 
the  bolts,  screws,  spikes,  chains;  the  ropes,  of  steel  and 
hemp  and  cotton;  the  canvas  of  various  textures;  the 
blocks  and  winches  and  windlasses ;  the  pumps,  the  boats, 
the  sextants,  the  chronometers,  the  spy-glasses  and  patent 
logs,  the  barometers  and  thermometers,  charts,  nautical 
almanacs,  rockets  and  colored  lights ;  food,  clothing,  tools, 
medicines  and  furniture,  and  all  the  various  things,  which 
it  would  be  tiresome  fully  to  specify,  that  go  to  the  con- 
struction and  furnishing  of  a  first-class  sailing-ship  of 
modern  type,  to  say  nothing  of  the  still  greater  complexity 
of  the  first-class  steamer.  Directed  cooperation  never  did, 
and  I  do  not  think  in  the  nature  of  things  it  ever  could, 
make  and  assemble  such  a  variety  of  products,  involving 
as  many  of  them  do  the  use  of  costly  machinery  and 
consummate  skill,  and  the  existence  of  subsidiary  products 
and  processes. 

When  a  ship-builder  receives  an  order  for  such  a  ship 
as  this  he  does  not  send  men  into  the  forest,  some  to  cut 
oak,  others  to  cut  yellow  pine,  others  to  cut  white  pine, 
others  to  cut  hickory  and  others  still  to  cut  ash  and  lig- 
num-vitas  ;  he  does  not  direct  some  to  mine  iron  ore,  and 
others  copper  ore,  and  others  lead  ore,  and  others  still  to 
dig  the  coal  with  which  these  ores  are  to  be  smelted,  and 
the  fire-clay  for  the  smelting- vessels ;  some  to  plant  hemp, 
and  some  to  plant  cotton,  and  others  to  breed  silkworms ; 
some  to  make  glass,  others  to  kill  beasts  for  their  hides 
and  tallow,  some  to  get  pitch  and  rosin,  oil,  paint,  paper, 
felt  and  mercury.  Nor  does  he  attempt  to  direct  the 
manifold  operations  by  which  these  raw  materials  are  to 
be  brought  into  the  required  forms  and  combinations,  and 
assembled  in  the  place  where  the  ship  is  to  be  built.  Such 
a  task  would  transcend  the  wisdom  and  power  of  a  Solomon. 
What  he  does  is  to  avail  himself  of  the  resources  of  a  high 


390  THE  PRODUCTION  OF   WEALTH.          Book  III. 

civilization,  for  without  that  he  would  be  helpless,  and  to 
make  use  for  his  purpose  of  the  unconscious  cooperation 
by  which  without  his  direction,  or  any  general  direction, 
the  efforts  of  many  men,  working  in  many  different  places 
and  in  occupations  which  cover  almost  the  whole  field  of 
a  minutely  diversified  industry,  each  animated  solely  by 
the  effort  to  obtain  the  satisfaction  of  his  personal  desires 
in  what  to  him  is  the  easiest  way,  have  brought  together 
the  materials  and  productions  needed  for  the  putting 
together  of  such  a  ship. 

He  buys  of  various  dealers  in  such  things,  knees,  beams, 
planking,  spars,  sails,  cables,  ropes,  boats,  lanterns,  flags, 
nautical  instruments,  pumps,  stoves;  and  he  probably 
contracts  for  various  parts  of  the  work  of  putting  together 
the  hull,  such  as  calking,  sheathing,  painting,  etc. ;  of 
making  the  sails  and  rigging  the  spars.  And  each  of 
these  separate  branches  of  collation  and  production  will 
be  found  on  inquiry  to  reach  out  and  ramify  into  other 
branches  having  necessary  relations  with  still  other 
branches.  So  far  from  any  lifetime  sufficing  to  acquire, 
or  any  single  brain  being  able  to  hold,  the  varied  know- 
ledge that  goes  to  the  building  and  equipping  of  a  mod- 
ern sailing-ship,  already  becoming  antiquated  by  the  still 
more  complex  steamer,  I  doubt  if  the  best-informed  man 
on  such  subjects,  even  though  he  took  a  twelvemonth  to 
study  up,  could  give  even  the  names  of  the  various  sepa- 
rate divisions  of  labor  involved. 

A  modern  ship,  like  a  modern  railway,  is  a  product 
of  modern  civilization  •  of  that  correlation  of  individual 
efforts  in  which  what  we  call  civilization  essentially  con- 
sists; of  that  unconscious  cooperation  which  does  not 
come  by  personal  direction,  as  it  were  from  without,  but 
grows,  as  ^t  were  from  within,  by  the  relation  ul  the 
efforts  of  individuals,  each  seeking  the  satisfaction  of 
individual  desires.  A  mere  master  of  men,  though  he 


Chap.  X.  COOPERATION-ITS  TWO  KINDS.  391 

might  command  the  services  of  millions,  could  not  make 
such  a  ship  unless  in  a  civilization  prepared  for  it.  A 
Pharaoh  that  built  pyramids,  a  Genghis  Khan  who  raised 
mounds  of  skulls,  an  Alexander,  a  Caesar,  or  even  a 
Henry  VIII.  could  not  do  it. 

The  kind  of  cooperation  which  I  have  illustrated  by 
the  tacking  of  a  ship  is  a  very  simple  matter.  It  could  be 
readily  taught,  the  difficulties  of  language  aside,  to  Malays, 
or  Somalis,  or  Hindus,  or  Chinamen,  or  to  the  men  who 
manned  the  Roman  galleys  or  the  viking  ships.  But  that 
kind  of  cooperation  which  is  involved  in  the  making  of 
such  a  ship  is  a  much  deeper  and  more  complex  matter. 
It  is  beyond  the  power  of  conscious  direction  to  order  or 
bring  about.  It  can  no  more  be  advanced  or  improved 
by  any  exertion  of  the  power  of  directing  the  conscious 
actions  of  men  than  the  conscious  will  of  the  individual 
can  add  a  cubit  to  his  stature.  The  only  thing  that 
conscious  direction  can  do  to  aid  it  is  to  let  it  alone  j  to 
give  it  freedom  to  grow,  leaving  men  free  to  seek  the 
gratification  of  their  own  desires  in  the  ways  that  to  them 
seem  best.  To  attempt  to  apply  that  kind  of  cooperation 
which  requires  direction  from  without  to  the  work  proper 
for  that  kind  of  cooperation  which  requires  direction  from 
within,  is  like  asking  the  carpenter  who  can  build  a 
chicken-house  to  build  a  chicken  also. 

This  is  the  fatal  defect  of  all  forms  of  socialism— the 
reason  of  the  fact,  which  all  observation  shows,  that  any 
attempt  to  carry  conscious  regulation  and  direction  beyond 
the  narrow  sphere  of  social  life  in  which  it  is  necessary, 
inevitably  works  injury,  hindering  even  what  it  is  intended 
to  help. 

And  the  rationale  of  this  great  fact  may,  I  think,  at  least 
in  some  measure,  be  perceived  when  we  consider  that  the 
originating  element  in  all  production  is  thought  or  intel- 
ligence, the  spiritual  not  the  material.  This  spiritual 


362  THE  PRODUCTION  OF  WEALTH.          BooJcIIL 

as  to  rest  upon  the  superficies  required  for  the  resting  of 
one  brick  would  become  so  unstable  as  to  fall  with  the 
slightest  jar  or  breeze.  Before  ten  or  even  half  a  dozen 
bricks  had  been  rested  one  on  top  of  another  it  would 
become  evident  that  any  further  extension  of  the  perpen- 
dicular would  require  a  further  extension  of  base.  And 
even  with  such  extension  of  base  as  would  permit  of  per- 
pendicular solidity,  a  point  would  finally  be  reached 
where,  even  if  the  surface  continued  solid,  the  weight  of 
the  upper  bricks  would  crush  the  lower  bricks  to  powder. 
Thus  it  is  no  more  possible  indefinitely  to  store  bricks  on 
a  given  area  than  on  a  given  area  indefinitely  to  grow 
beets. 

Up  to  a  point,  moreover,  which  is  about  waist-high  for 
an  ordinary  man,  it  requires  less  exertion  to  place  or  take 
from  place  the  last  brick  than  the  first  brick,  or  in  other 
words,  labor  at  this  point  is  more  productive.  But  this 
point  of  greatest  productiveness  reached,  the  productive- 
ness of  labor  begins  to  decline  with  the  further  application 
of  labor  on  the  same  area,  until  the  point  of  no  return  or 
non-productiveness  is  reached.  The  reaching  of  this  point 
of  no  return  to  the  further  application  of  labor  in  the 
storing  of  bricks  on  a  given  area  may  be  delayed  by  the 
invention  and  use  of  such  labor-saving  devices  as  the 
wheelbarrow  and  steam-engine,  but  it  cannot  be  prevented. 
There  is  a  point  in  the  application  of  labor  to  the  storage 
of  bricks  on  any  given  area,  whether  a  square  foot  or  a 
square  mile,  where  the  application  of  successive  "  doses  of 
labor"  (to  use  the  phrase  of  the  writers  who  have  most 
elaborately  dwelt  on  this  assumed  "law  of  diminishing 
productiveness  in  agriculture")  must  cease  to  yield  pro- 
portionate returns,  and  finally  where  they  must  cease  to 
yield  any  return. 

Thus  the  law  of  diminishing  returns  which  has  been 
held  as  peculiar  to  agriculture  is  as  fully  shown  in  the 


Chap.  VII.     RELATION  OF   SPACE  IN  PRODUCTION.        363 

mere  storage  of  bricks  as  it  is  in  the  growing  of  crops  or 
the  breeding  of  animals.  It  is  quite  as  true  that  all  the 
bricks  now  needed  in  the  three  kingdoms  could  not  be 
stored  on  a  single  square  yard,  as  it  is  that  all  the  food 
needed  in  the  three  kingdoms  could  not  be  grown  on  a 
single  acre.  The  point  of  greatest  efficiency  or  maximum 
productiveness  in  the  application  of  labor  to  land  exists  in 
all  modes  and  all  forms  of  production.  It  results  in  fact 
from  nothing  more  nor  less  than  the  universal  law  or 
condition  that  all  material  existence,  and  consequently  all 
production  of  wealth,  requires  space. 

Nor  has  the  spacial  requirement  of  production  merely 
regard  to  the  material  object  of  production  j  it  has  regard 
as  well  to  the  producer— to  labor  itself.  Man  himself  is 
a  material  being  requiring  space  for  his  existence  even 
when  in  the  most  passive  condition,  and  still  more  space  for 
the  movements  necessary  to  the  continuous  maintenance 
of  life  and  the  exertion  of  his  powers  in  the  production  of 
wealth.  For  an  hour  or  two  men  may,  as  in  listening  to 
a  speech  or  looking  at  a  spectacle,  remain  crowded  together 
in  a  space  which  gives  them  little  more  than  standing-room. 
But  to  bring  a  few  more  into  such  a  crowd  would  mean 
illness,  death,  panic.  Nor  in  such  narrow  space  as  men 
may  for  a  while  safely  stand,  could  life  be  maintained  for 
twenty-four  hours,  still  less  any  mode  of  producing  wealth 
be  carried  on. 

The  division  of  labor  permits  the  concentration  of  work- 
ers whose  particular  parts  in  production  require  compara- 
tively little  space,  and  by  building  houses  one  story  above 
another  in  our  cities  we  economize  superficial  area  in  fur- 
nishing dwelling  and  working  places  in  much  the  same  way 
as  by  storing  bricks  one  upon  another.  Improvements  in 
the  manufacture  of  steel  and  in  the  utilization  of  steam  and 
electricity  have  much  increased  the  height  to  which  such 
structures  can  be  carried,  and  we  already  have  in  our 


364  THE  PRODUCTION  OF  WEALTH.          BooTc  III. 

large  American  cities  buildings  of  over  twenty  stories  in 
which  production  of  some  sort  is  carried  on.  But  though 
the  requirement  of  superficial  area  may  thus  be  pressed 
back  a  little  by  making  use  of  cubical  area  (and  in  the 
tallest  buildings  of  New  York  and  Chicago  rent  is  estimated 
in  cubic  not  in  square  feet)  this  is  only  possible  to  a  slight 
degree.  The  intensive  use  of  land  shown  in  the--twenty- 
story  building  is  in  fact  made  possible  by  the  extensive 
use  of  land  brought  about  by  improvements  in  transpor- 
tation, and  every  one  of  these  monstrous  buildings  erected 
lessens  the  availability  of  adjoining  land  for  similar 
purposes. 


CHAPTER  VIII. 
THE  RELATION  OF  TIME  IN  PRODUCTION. 

SHOWING  THAT  ALL  MODES  OF  PRODUCTION  HAVE 
RELATION  TO  TIME. 

Difference  between  apprehensions  of  space  and  time,  the  one  objec- 
tive, the  other  subjective — Of  spirits  and  of  creation — All  pro- 
duction requires  time— The  concentration  of  labor  in  time. 

AS  space  is  the  relation  of  things  in  extension,  so  time 
J\_  is  the  relation  of  things  in  sequence. 

But  time,  the  relation  of  sequence,  seems  when  we  think 
of  it?  to  be,  so  to  speak,  wider  than  space,  the  relation  of 
extension.  That  is  to  say,  space  is  a  quality  or  affection 
of  what  we  call  matter ;  and  while  we  conceive  of  imma- 
terial things  which  having  no  extension  have  no  relation 
in  space,  we  cannot  conceive  of  even  immaterial  things  as 
having  no  relation  in  sequence. 

Our  apprehension  of  space  is  through  our  senses,  the 
direct  impressions  of  which  are  uncertain  and  misleading, 
but  which  we  habitually  verify  and  correct  and  give  some 
sort  of  exactness  to,  through  other  impressions  of  our 
senses.  Our  first  and  simplest  measure  of  space  is  in  the 
impression  of  relative  distance  produced  through  the  sight, 
or  in  the  feeling  of  exertion  required  to  move  ourselves  or 
some  other  object  from  point  to  point,  as  by  paces  or 
stone's  throw  or  bow-shot ;  and  these  give  way  to  more 

365 


366  THE  PRODUCTION  OF  WEALTH.          Book  III. 

exact  measurements,  such  as  by  lines,  inches,  feet,  miles, 
diameters  of  the  earth  or  of  the  earth's  orbit.  Deprived 
of  the  senses,  which  make  us  cognizant  of  matter,  it  is 
impossible  to  see  how  we  could  have  any  impression  or 
idea  of  space. 

Our  impression  of  time,  however,  is  not  primarily 
through  our  senses.  Though  we  correct  and  verify  and 
give  some  exactness  to  it  through  them,  there  is  a  purely 
subjective  apprehension  of  time  in  our  own  mental  impres- 
sions or  thoughts,  which  do  not  come  all  at  once,  but 
proceed  or  succeed  one  another,  having  to  each  other  a 
relation  of  sequence.  It  is  through  this  succession  of 
mental  impressions  that  we  are  in  the  first  place  and  directly 
conscious  of  time.  But  while  our  direct  consciousness  of 
space  must  vary  widely,  our  direct  impressions  of  time  are 
more  variable  still,  since  they  depend  upon  the  rapidity 
and  intensity  of  mental  impressions.  We  may  seem  to 
have  lived  through  years  in  the  intense  activity  of  a  vivid 
dream,  and  to  be  utterly  unconscious  of  the  passage  of 
time  in  a  sound  sleep.  And  while  we  can  conceive  the 
impression  of  space  to  be  very  different  on  the  part  of  a 
sloth  and  that  of  a  greyhound,  it  may  be  that  the  brief 
day  of  an  animalcule  may  seem  as  long  to  it  as  does  a 
century  of  life  to  the  larger  elephant. 

But  the  reason  of  man  enables  him  to  obtain  more  exact 
measures  of  sequence  from  the  uniformities  of  natural 
phenomena,  such  as  days  or  years,  moons  or  seasons,  and 
from  the  regularity  of  mechanical  movement  as  by  sand- 
glasses or  dials,  or  by  clocks  or  watches. 

Time  seems  indeed  to  be  necessary  to  and  in  some  degree 
coincident  with  all  perceptions  of  space.  But  space  does 
not  seem  necessary  to  time.  That  is  to  say,  we  seem  to  be 
able  to  imagine  an  immaterial  being,  or  pure  intelligence, 
not  limited  by  or  having  necessary  consciousness  of 
relations  of  extension,  and  this  is  the  way  in  which  we 


Chap.VIIL       RELATION  OF   TIME  IN   PRODUCTION.       367 

usually  think  of  unembodied  spirits,  such  as  angels  or 
devils;  and  of  disembodied  spirits,  such  as  ghosts.  But 
we  cannot  really  think  thus  of  them  with  regard  to  relations 
of  sequence.  We  can  indeed  think  of  them  as  knowing 
nothing  and  regarding  nothing  of  our  measures  of  time— 
of  a  day  being  to  them  as  a  thousand  years,  or  a  thousand 
years  as  a  day,  for  that  these  measures  are  only  relative 
we  can  see  for  ourselves.  But  we  can  also  see  that  in  the 
realm  of  spirit  there  is  and  must  be  the  same  relation  of 
preceding  and  succeeding,  of  coming  before  and  coming 
after,  as  in  the  realm  of  matter  j  and  that  this  relation  of 
sequence  or  time  is  really  clearer  and  closer  to  that  in  us 
which  we  must  think  of  as  our  immaterial  part  than  is 
that  of  extension  or  space  to  our  physical  parts. 

We  usually  think  of  creation,  the  bringing  into  existence 
by  a  power  superior  to  and  anterior  to  that  of  man,  as 
taking  place  at  once  as  by  the  Divine  fiat :  "  God  said,  Let 
there  be  light :  and  there  was  light.77  But  it  would  seem 
on  analysis,  that  in  this  way  of  thinking  we  are  considering 
rather  the  mental  action  which  we  conceive  of  as  in  itself 
immaterial— which  our  experience  so  far  as  it  goes,  and 
our  reason  so  far  as  it  can  reach,  teach  us  must  lie  back 
of  all  material  expression— than  of  the  material  expres- 
sion itself.  All  speculations  and  theories  of  the  origin 
of  the  cosmos,  all  religions  which  are  their  popular  ex- 
pression, conceive  of  the  appearance  of  material  phenom- 
ena as  in  order  or  sequence,  and  consequently  in  time. 
Save  in  its  childlike  measurement  of  time  by  days,  the 
ancient  Hebrew  account  of  the  genesis  of  the  material 
world  recognizes  this  necessary  order  or  sequence  as 
fully  as  do  modern  scientists,  for  whose  almost  as  vague 
measurements  millenniums  are  too  short.  And  so  far  as 
we  can  see,  thought  itself  is  in  sequence  and  requires  time, 
and  its  continued  exertion  brings  about  weariness.  It,  at 
any  rate,  seems  to  me  that  if  we  consider  the  essential  and 


368  THE  PRODUCTION  OF  WEALTH.          Book  UL 

not  merely  the  crude  expression  of  the  Hebrew  scripture 
that  in  six  days  God  created  the  heavens  and  the  earth 
and  rested  on  the  seventh,  it  may  embody  a  deep  truth— 
the  truth  that  exertion,  mental  as  physical,  requires  a 
season  of  rest. 

But,  all  such  speculations  aside,  it  is  certain  that  all 
production  of  wealth  takes  place  in  sequence  and  requires 
time.  The  tree  must  be  felled  before  it  can  be  hewn  or 
sawed  into  lumber  j  lumber  must  be  seasoned  before  it  can 
be  used  in  building  or  wrought  into  the  manifold  articles 
made  of  wood.  Ore  must  be  taken  from  the  vein  before 
it  can  be  smelted  into  iron,  or  from  that  form  turned  into 
steel  or  any  of  the  manifold  articles  which  by  subsequent 
processes  are  made  from  iron  or  steel.  Seeds  must  be 
planted  before  they  can  germinate;  there  must  be  a 
considerable  interval  of  time  before  the  young  shoots  can 
show  themselves  above  the  ground  j  then  a  longer  interval 
before  they  can  grow  and  ripen  and  produce  after  their 
order ;  grain  must  be  harvested  and  ground  before  it  can 
be  converted  into  meal  or  flour  or  changed  by  labor  from 
that  form  into  other  forms  which  gratify  desire,  all  of 
which,  like  fermenting  and  baking,  require  time.  So,  in 
exchanging,  time  is  required  even  for  the  concurrence 
and  expression  of  human  wills  which  result  in  the  agree- 
ment to  exchange,  and  still  more  time  for  the  actual 
transference  of  things  which  completes  the  exchange.  In 
short,  time  is  a  necessary  element  or  condition  in  all 
exertion  of  labor  in  production. 

Now,  from  this  necessary  element  or  condition  of  all 
production,  time,  there  result  consequences  similar  to  those 
which  result  from  the  necessary  element  or  condition  of 
all  production,  space.  That  is  to  say,  there  is  a  law 
governing  and  limiting  the  concentration  of  labor  in  time, 
as  there  is  a  law  governing  and  limiting  the  concentration 
of  labor  in  space.  Thus  there  is  in  all  forms  of  production 


Chap.  VIII.       RELATION  OF   TIME  IN  PRODUCTION.       369 

a  point  at  which  the  concentration  of  labor  in  time  gives 
the  largest  proportionate  result  j  after  which  the  further 
concentration  of  labor  in  time  tends  to  a  diminution  of 
proportionate  result,  and  finally  to  prevent  result. 

Thus  there  is  a  certain  degree  of  concentration  of  labor 
in  time  (intensity  of  exertion),  by  which  the  individual  can 
in  any  productive  occupation  accomplish  on  the  whole  the 
largest  result.  But  if  a  man  work  harder  than  this, 
endeavoring  to  concentrate  more  exertion  in  a  shorter 
time,  it  will  be  to  the  relative  and  finally  to  the  absolute 
loss  of  productiveness— a  principle  which  gives  its  point 
to  the  fable  of  the  hare  and  the  tortoise. 

And  so,  if  I  go  to  a  builder  and  say  to  him,  "  In  what 
time  and  at  what  price  will  you  build  me  such  and  such  a 
house  f "  he  would,  after  thinking,  name  a  time,  and  a  price 
based  on  it.  This  specification  of  time  would  be  essential, 
and  would  involve  a  certain  concentration  of  labor  in  time 
as  the  point  of  largest  return  or  least  cost.  This  I  would 
soon  find  if,  not  quarreling  with  the  price,  I  ask  him  largely 
to  lessen  the  time.  If  I  be  a  man  like  Beckford— the  author 
of  "Vathek,"  for  whom  Fonthill  was  built  by  relays  of 
workmen,  who  lighted  up  the  night  with  huge  fires— a 
man  to  whom  cost  is  nothing  and  time  everything,  I  might 
get  the  builder  somewhat  to  reduce  the  time  in  which  he 
would  agree,  under  bond,  to  build  the  house  j  but  only  by 
greatly  increasing  the  price,  until  finally  a  point  would 
be  reached  where  he  would  not  consent  to  build  the  house 
in  less  time  no  matter  at  what  price.  He  would  say: 
"Although  I  get  bricks  already  made,  and  boards  already 
planed,  and  stairs  and  doors,  and  sashes  and  blinds,  and 
whatever  else  may  be  obtained  from  the  mill,  and  no 
matter  how  many  men  I  put  on  and  how  much  I  disregard 
economy,  the  building  of  a  house  requires  time.  Cellar 
cannot  be  dug  and  foundations  raised,  and  walls  built  and 
floors  laid,  and  roof  put  on,  and  partitioning  and  plastering, 


370  THE  PRODUCTION  OF  WEALTH.          Book  III. 

and  plumbing,  and  painting  and  papering  be  done  all  at 
once,  but  only  one  after  another,  and  at  the  cost  of  time 
as  well  as  labor.  The  thing  is  impossible." 

And  so,  although  the  concentration  of  labor  in  agricul- 
ture may  with  decreasing  efficiency  hasten  beyond  the 
normal  point  the  maturity  of  vegetables  or  fruit  or  even 
of  animals,  yet  the  point  of  absolute  non-productiveness 
of  further  applications  of  labor  is  soon  reached,  and  no 
amount  of  human  exertion  applied  in  any  way  we  have  yet 
discovered  could  bring  wheat  from  the  seed  to  the  ear,  or 
the  chick  from  the  egg  to  the  laying  hen,  in  a  week. 

The  importance  in  political  economy  of  this  principle 
that  all  production  of  wealth  requires  time  as  well  as  labor 
we  shall  see  later  on;  but  the  principle  that  time  is  a 
necessary  element  in  all  production  we  must  take  into 
account  from  the  very  first. 


CHAPTER  IX. 
COOPERATION-ITS  TWO  WAYS. 

SHOWING  THE  TWO  WAYS  OF  COOPERATION. 

Cooperation  is  the  union  of  individual  powers  in  the  attainment  of 
common  ends — Its  ways  and  their  analogues  :  (1)  the  combination 
of  effort;  (2)  the  separation  of  effort— Illustrations :  of  building 
houses,  of  joint-stock  companies,  etc.— Of  sailing  a  boat— The 
principle  shown  in  naval  architecture— The  Erie  Canal— The  bak- 
ing of  bread — Production  requires  conscious  thought — The  same 
principle  in  mental  effort— What  is  on  the  one  side  separation  is 
on  the  other  concentration— Extent  of  concentration  and  speciali- 
zation of  work  in  modern  civilization— The  principle  of  the  ma- 
chine—Beginning and  increase  of  division  of  labor— Adam 
Smith's  three  heads— A  better  analysis. 

/COOPERATION  means  joint  action;  the  union  of 
\J  efforts  to  a  common  end.  In  recent  economic  writings 
the  word  has  been  so  much  used  in  a  narrower  sense  that 
its  meaning  in  political  economy  is  given  in  the  latest 
American  dictionary  (the  Standard)  as  "a  union  of 
laborers  or  small  capitalists  for  the  purpose  of  advanta- 
geously manufacturing,  buying  and  selling  goods,  and 
of  pursuing  other  modes  of  mutual  benefit ;  also,  loosely, 
profit-sharing." 

This  is  a  degradation  of  a  word  that  ought  not  to  be 
acquiesced  in,  either  in  the  interests  of  the  English  language 
or  in  the  interests  of  political  economy,  and  at  the  risk  of 
being  misunderstood  by  those  who  have  become  accus- 

371 


372  THE  PRODUCTION  OF  WEALTH.          Book  III. 

tomed  to  associate  it  with  trivial  schemes  of  profit-sharing 
or  namby-pamby  "reconciliations"  of  capital  and  labor,  I 
shall  use  it  as  an  economic  term  in  its  full  meaning — 
understanding  by  cooperation  that  union  of  individual 
powers  in  the  attainment  of  common  ends  which,  as  already 
said  (Book  I.,  Chapter  V.),  is  the  means  whereby  the 
enormous  increase  of  man's  power  that  characterizes 
civilization  is  secured. 

All  increase  in  the  productive  power  of  man  over  that 
with  which  nature  endows  the  individual  comes  from  the 
cooperation  of  individuals.  But  there  are  two  ways  in 
which  this  cooperation  may  take  place. 

1.  By  the  combination  of  effort.     In  this  way,  indi- 
viduals may  accomplish  what  exceeds  the  full  power  of  the 
individual. 

2.  By  the  separation  of  effort.     In  this  way,  the  indi- 
vidual may  accomplish  for  more  than  one  what  does  not 
require  the  full  power  of  the  individual. 

This  first  way  of  cooperation  may  be  styled  the  com- 
bination of  labor,  though  perhaps  the  most  distinctive  term 
that  could  be  used  for  it  would  be,  the  multiplication  of 
labor,  since  the  second  way  is  well  known  by  the  term 
Adam  Smith  adopted  for  it,  "  the  division  of  labor." 

The  one,  the  combination  of  labor,  is  analogous  to  the 
application  in  mechanics  of  that  principle  of  the  lever  by 
which  larger  masses  are  moved  in  shorter  distance  or 
longer  time,  as  in  the  crowbar.  The  other,  the  division  of 
labor,  is  analogous  to  the  application  of  that  principle  of 
the  lever  by  which  smaller  masses  are  moved  in  longer 
distance  or  shorter  time,  as  in  the  oar. 

To  illustrate :  The  first  way  of  cooperation,  the  com- 
bination of  labor,  enables  a  number  of  men  to  remove  a 
rock  or  to  raise  a  log  that  would  be  too  heavy  for  them 
separately.  In  this  way  men  conjoin  themselves,  as  it 
were,  into  one  stronger  man. 


Chap.  IX.  COOPERATION-ITS  TWO  WAYS.  373 

Or  to  take  an  example  so  common  in  the  early  days  of 
American  settlement  that  "  log-rolling"  has  become  a  term 
for  legislative  combination :  Tom,  Dick,  Harry  and  Jim 
are  building  near  each  other  their  rude  houses  in  the 
clearings.  Each  hews  his  own  trees,  but  the  logs  are  too 
heavy  for  one  man  to  get  into  place.  So  the  four  unite 
their  efforts,  first  rolling  one  man's  logs  into  place  and 
then  another's,  until  the  logs  of  all  f  our  having  been  placed, 
the  result  is  the  same  as  if  each  had  been  enabled  to 
concentrate  into  one  time  the  force  he  could  exert  in  four 
different  times.  Examples  of  the  same  principle  in  a 
more  elaborate  state  of  society  are  to  be  found  in  the 
formation  of  joint-stock  companies— the  union  of  many 
small  capitals  to  accomplish  works  such  as  the  building  of 
railroads,  the  construction  of  steamships,  the  erection  of 
factories,  etc.,  which  require  greater  capitals  than  are 
possessed  by  one  man. 

But  while  great  advantages  result  from  the  ability  of 
individuals,  by  the  combination  of  labor,  to  concentrate 
themselves  as  it  were  into  one  larger  man,  there  are  other 
times  and  other  things  in  which  an  individual  could 
accomplish  more  if  he  could  divide  himself,  as  it  were, 
into  a  number  of  smaller  men. 

Thus  in  sailing  a  boat,  one  man  of  extraordinary  strength 
would  be  equal  to  two  men  of  half  his  strength  only  in 
such  exertions  as  rowing,  hoisting  the  heavier  sails,  or  the 
like.  In  other  things,  two  men  of  ordinary  strength  would 
be  able  to  do  far  more  than  the  one  man  of  double  strength, 
since  where  he  would  have  to  stop  one  thing  to  do  another, 
they  could  do  both  things  at  once.  Thus  while  he  would 
have  to  anchor  in  order  to  rest,  they  could  move  on  without 
stopping,  one  sailing  the  boat  while  the  other  slept.  There 
was  a  King  Alphonso  of  Castile,  celebrated  by  Emerson, 
who  wished  that  men  could  be  concentrated  nine  into  one. 
But  the  loss  of  available  power  that  would  thus  result 


374  THE  PRODUCTION  OF  WEALTH.          Book  III. 

would  soon  be  seen.  How  often  now  when  beset  by  calls 
or  duties  which  require,  not  so  much  strength  as  time, 
does  the  thought  occur,  "  I  wish  I  could  divide  myself  into 
half  a  dozen."  What  the  division  of  labor  does,  is  to  permit 
men,  as  it  were,  so  to  divide  themselves,  thus  enormously 
increasing  their  total  effectiveness, 

To  illustrate  from  the  example  used  before :  While  at 
times  Tom,  Dick,  Harry  and  Jim  might  each  wish  to  move 
logs,  at  other  times  they  might  each  need  to  get  something 
from  a  village  distant  two  days'  journey.  To  satisfy  this 
need  individually  would  thus  require  two  days'  effort  on 
the  part  of  each.  But  if  Tom  alone  goes,  performing  the 
errands  for  all,  and  the  others  each  do  half  a  day's  work 
for  him,  the  result  is  that  all  get  at  the  expense  of  half  a 
day's  effort  on  the  part  of  each  what  otherwise  would  have 
required  two  days'  effort. 

It  is  in  this  manner  that  the  second  way  of  cooperation, 
the  separation  of  effort,  or  to  continue  the  term  adopted  by 
Adam  Smith  and  sanctioned  by  long  usage,  the  division  of 
labor,  saves  labor ;  that  is  to  say,  permits  the  accomplish- 
ment of  equal  results  with  less  exertion,  or  of  larger  results 
with  equal  exertion.  But  out  of  this  primary  saving  of 
exertion  arise  other  savings  of  exertion. 

Let  me  illustrate  from  a  domain  outside  of  political 
economy  the  general  principle  from  which  these  gains 
proceed.  Nothing,  perhaps,  better  shows  the  flexibility  of 
the  human  mind  than  naval  architecture.  Yet,  from  the 
rude  canoe  to  the  monster  ironclad,  in  all  the  endless 
variety  of  form  that  men  have  given  to  vessels  intended 
to  be  propelled  through  the  water,  one  principle  always 
obtains.  We  always  make  such  vessels  longer  than  they 
are  broad.  Why  is  it  that  we  do  so  ?  It  is  that  a  vessel 
moving  through  the  water  has  two  main  points  of  resistance 
to  overcome— (1)  the  displacement  of  the  water  at  her  bow, 
the  resistance  to  which  is  shown  by  the  ripple  or  wave  that 


Chap.  IX.  COOPERATION-ITS  TWO  WAYS.  375 

arises  there,  and  (2)  the  replacement  of  the  water  at  her 
stern,  the  resistance  to  which  is  shown  by  the  suction  or 
wake  or  "  dead  water"  that  she  drags  after  her.  In  addition 
she  must  also  overcome  skin  friction,  shown,  if  one  looks 
over  the  side  of  a  vessel  moving  in  smooth  water,  by  the 
thin  line  of  "dead  water"  or  small  ripples  at  her  sides. 
But  this,  area  for  area,  is  slight  as  compared  with  the 
force  required  for  displacement  and  replacement. 

When  the  Erie  Canal  was  first  built  its  locks  were 
constructed  to  accommodate  boats  of  a  certain  length. 
The  enlargement  of  these  locks  so  as  to  admit  boats  of 
double  that  length  is  now  going  on,  but  is  not  yet  entirely 
completed,  so  that  to  pass  through  the  entire  canal,  boats 
of  the  shorter  length  must  still  be  used.  Each  of  these 
boats  is  usually  pulled  by  two  horses  or  mules.  But 
whoever  passes  over  the  railroads  that  parallel  this  great 
waterway  will  notice  that  for  much  of  the  distance  the 
boats  are  now  run  in  pairs,  the  bow  of  one  boat  being 
fastened  to  the  stern  of  its  predecessor,  and  that  instead 
of  four  horses  for  the  two  boats  only  three  are  used. 
What  makes  this  economy  possible  is  that  the  displacement 
for  the  two  boats  is  mainly  borne  by  the  first  boat,  and 
the  replacement  for  the  two  is  mainly  borne  by  the  second 
boat.  As  the  additional  force  required  to  move  two  boats 
instead  of  one  is  thus  not  much  more  than  the  additional 
skin  friction,  three  animals  suffice  instead  of  four.  If  the 
boats  were  so  constructed  as  to  fit  closely  together  the 
economy  would  be  still  greater. 

Now,  what  we  do  in  building  a  vessel  is  virtually  to 
place  one  cross-section  behind  another  cross-section  so 
that  the  whole  may  be  moved  with  no  more  resistance  of 
displacement  and  replacement  than  would  be  required  to 
move  any  one  cross-section.  The  principle  is  the  same  as 
that  which  would  prompt  us  if  we  had  to  carry  two  bodies 
through  a  wall,  to  carry  the  second  through  the  hole  that 


376  THE  PRODUCTION  OF  WEALTH.          Book  III. 

it  would  be  necessary  to  make  for  the  first,  instead  of 
making  another  hole.  In  addition  to  this  the  increase  of 
length  without  increase  of  width  which  results  virtually 
from  the  placing  of  the  cross-sections  behind  each  other, 
permits  the  graduation  or  sharpening  of  entrance  and 
egress,  thus  allowing  displacement  and  replacement  to  be 
effected  in  longer  times  or  more  gradually,  and  with  les- 
sened resistance  j  although  the  fact  that  resisting  surface 
does  not  increase  proportionately  to  increase  in  cubical 
capacity,  enables  the  large  vessel  to  outstrip  the  small 
vessel  with  the  same  proportionate  expenditure  of  power, 
even  if  built  on  the  same  lines. 

Now  these  principles,  or  rather  this  principle,  for  at 
bottom  they  are  one,  have  their  analogues  in  our  making 
of  things.  Just  as  ten  thousand  tons  can  be  transported 
in  one  vessel  at  much  greater  speed  or  with  much  less 
expenditure  of  power  than  in  ten  thousand  vessels  of  one 
ton  each,  so  can  production  be  facilitated  and  economized 
by  doing  together  things  of  like  kind  that  are  to  be  done. 

Take  for  instance  the  baking  of  bread.  To  bake  a  loaf 
of  bread  requires  the  application  of  a  certain  amount  of 
heat  for  a  certain  time  to  a  certain  amount  of  dough.  To 
heat  an  oven  to  this  point  requires  a  certain  expenditure 
of  fuel;  to  maintain  it  for  this  time  a  certain  other 
expenditure  of  fuel ;  and  a  certain  expenditure  of  fuel  is 
lost  in  the  cooling  of  the  oven  after  the  bread  is  baked. 
To  bake  one  loaf  of  bread  in  an  ordinary  oven  thus 
requires  a  much  greater  relative  expenditure  of  fuel  than 
is  required  to  bake  at  one  time  as  many  loaves  as  the  oven 
will  hold  ;  and  a  larger  oven  will  bake  more  loaves  with  a 
proportionately  less  expenditure  of  fuel  than  a  smaller 
one,  since  the  loss  of  heat  that  escapes  from  the  work  of 
baking  is  relatively  less;  and  if  one  batch  of  bread  is 
succeeded  by  another  batch  without  suffering  the  oven  to 
cool,  another  great  relative  saving  is  made.  So  that  the 

.34. 


Cliap.X.  COOPERATION-ITS  TWO  KINDS.  393 

physical  power  of  the  units,  but  the  sum  of  their  intelli- 
gence. If  I  may  be  permitted  to  use  for  a  moment  the 
term  "man  power"  and  symbol  M  as  expressing  the 
physical  force  which  one  individual  can  exert,  and  the 
term  "  mind  power  "  and  symbol  M'  as  suggesting  quanti- 
tatively the  individual  power  of  intelligence  or  thought, 
the  best  possible  result  of  the  exertion  of  one  hundred 
thousand  men  in  cooperation  of  the  first  kind  would  be 
100,000  man  power  x  1  mind  power  or  100,000  MM7 ; 
while  of  the  same  number  of  men  employed  in  the  second 
kind  of  cooperation  it  would  be  100,000  man  power  x 
100,000  mind  power  or  10,000,000,000  MM'. 

The  illustration  is  clumsy,  but  it  may  serve  to  suggest 
the  enormous  difference  which  we  see  developed  in  the 
two  kinds  of  cooperation,  and  which  as  it  seems  to  me 
arises  at  least  in  important  part  from  the  fact  that  while 
in  the  second  kind  of  cooperation  the  sum  of  intelligence 
utilized  is  that  of  the  whole  of  the  cooperating  units,  in 
the  first  kind  of  cooperation  it  is  only  that  of  a  very  small 
part. 

In  other  words  it  is  only  in  independent  action  that  the 
full  powers  of  the  man  may  be  utilized.  The  subordination 
of  one  human  will  to  another  human  will,  while  it  may  in 
certain  ways  secure  unity  of  action,  must  always  where 
intelligence  is  needed,  involve  loss  of  productive  power. 
This  we  see  exemplified  in  slavery  and  where  governments 
have  undertaken  (as  is  the  tendency  of  all  government) 
unduly  to  limit  the  freedom  of  the  individual.  But  where 
unity  of  effort,  or  rather  combination  of  effort,  can  be 
secured  while  leaving  full  freedom  to  the  individual,  the 
whole  of  productive  power  may  still  be  utilized  and  the 
result  be  immeasurably  greater. 

The  hardening  of  muscular  tissue,  which  comes  to  us  as 
the  years  of  our  lives  go  by,  has  deprived  the  delicate 
mechanism  which  once  adequately  moved  the  lenses  of  my 


394  THE  PRODUCTION  OF  WEALTH.          Book  III. 

eyes  of  what  opticians  call  their  power  of  accommodation, 
so  that  to  my  natural  sight  printed  pages  that  I  once  read 
comfortably  are  now  indistinguishably  confused.  By 
piercing  a  small  pinhole  in  a  piece  of  cardboard  and 
holding  it  close  to  one  of  my  eyes,  while  I  shut  the  other, 
I  can  cut  off  from  my  vision  so  many  of  the  rays  of  light 
that  the  few  which  reach  my  retina  do  not  interfere  with 
each  other,  and  I  can  thus  see  the  same  printed  page  for 
a  few  moments  distinctly.  But  this  is  by  the  sacrifice  of 
otherwise  available  rays  of  light.  Now  by  means  of  a 
properly  ground  pair  of  spectacles  which  deflect  so  as  to 
utilize  for  the  eyes  the  interfering  rays  of  light  I  can  use 
them  all. 

To  attempt  in  social  affairs  to  secure  by  cooperation  of 
the  first  kind  that  alignment  of  effort  which  by  natural 
law  belongs  to  cooperation  of  the  second  kind,  is  like 
attempting  to  secure  by  cardboard  and  pinholes  the 
definiteness  of  vision  that  can  be  far  better  secured  by 
spectacles.  Such  is  the  attempt  of  what  is  properly  called 
socialism. 

Imagine  an  aggregation  of  men  in  which  it  was  attempted 
to  secure  by  the  external  direction  involved  in  socialistic 
theories  that  division  of  labor  which  grows  up  naturally 
in  society  where  men  are  left  free.  For  the  intelligent 
direction  thus  required  an  individual  man  or  individual 
men  must  be  selected,  for  even  if  there  be  angels  and 
archangels  in  the  world  that  is  invisible  to  us,  they  are 
not  at  our  command. 

Taking  no  note  of  the  difficulties  which  universal  ex- 
perience shows  always  to  attend  the  choice  of  the  de- 
positaries of  power,  and  ignoring  the  inevitable  tendency 
to  tyranny  and  oppression,  of  command  over  the  actions 
of  others,  simply  consider,  even  if  the  very  wisest  and  best 
of  men  were  selected  for  such  purposes,  the  task  that  would 
be  put  upon  them  in  the  ordering  of  the  when,  where,  how 


Chap.  X.  COOPERATION-ITS   TWO  KINDS.  395 

and  by  whom  that  would  be  involved  in  the  intelligent 
direction  and  supervision  of  the  almost  infinitely  complex 
and  constantly  changing  relations  and  adjustments  in- 
volved in  such  division  of  labor  as  goes  on  in  a  civilized 
community.  The  task  transcends  the  power  of  human 
intelligence  at  its  very  highest.  It  is  evidently  as  much 
beyond  the  ability  of  conscious  direction  as  the  correlation 
of  the  processes  that  maintain  the  human  body  in  health 
and  vigor  is  beyond  it. 

Aristotle,  Julius  CaBsar,  Shakespeare,  Newton,  may  be 
fairly  taken  as  examples  of  high-water  mark  in  the  powers 
of  the  human  mind.  Could  any  of  them,  had  the  control 
of  the  processes  that  maintain  the  individual  organism 
been  relegated  to  his  conscious  intelligence,  have  kept  life 
in  his  body  a  single  minute?  Newton,  so  the  tradition 
runs,  stopped  his  tobacco-bowl  with  his  lady's  finger. 
What  would  have  become  of  Newton's  heart  if  the  ordering 
of  its  beats  had  been  devolved  on  Newton's  mind  ? 

This  mind  of  ours,  this  conscious  intelligence  that 
perceives,  compares,  judges  and  wills,  wondrous  and  far- 
reaching  as  are  its  powers,  is  like  the  eye  that  may  look 
to  far-off  suns  and  milky  ways,  but  cannot  see  its  own 
mechanism.  This  body  of  ours  in  which  our  mind  is 
cased,  this  infinitely  complex  and  delicate  machine  through 
which  that  which  feels  and  thinks  becomes  conscious  of 
the  external  world,  and  its  will  is  transmuted  into  motion, 
exists  only  by  virtue  of  unconscious  intelligence  which 
works  while  conscious  intelligence  rests ;  which  is  on  guard 
while  it  sleeps ;  which  wills  without  its  concurrence  and 
plans  without  its  contriving,  of  which  it  has  almost  no 
direct  knowledge  and  over  which  it  has  almost  no  direct 
control. 

And  so  it  is  the  spontaneous,  unconscious  cooperation 
of  individuals  which,  going  on  in  the  industrial  body, 
the  Greater  Leviathan  than  that  of  Hobbes,  conjoins 


396  THE  PRODUCTION  OF  WEALTH.          BooJcIII. 

individual  efforts  in  the  production  of  wealth,  to  the 
enormous  increase  in  productive  power,  and  distributes 
the  product  among  the  units  of  which  it  is  composed.  It 
is  the  nature  and  laws  of  such  cooperation  that  it  is  the 
primary  province  of  political  economy  to  ascertain. 


CHAPTER  XI. 
THE   OFFICE  OF  EXCHANGE   IN   PRODUCTION. 

SHOWING  THAT  IN  MAN  THE  LACK  OF  INSTINCT  IS  SUPPLIED 
BY  THE  HIGHER  QUALITY  OF  REASON,  WHICH  LEADS  TO 
EXCHANGE. 

The  cooperation  of  ants  and  bees  is  from  within  and  not  from  with- 
out ;  from  instinct  and  not  from  direction — Man  has  little  instinct ; 
but  the  want  supplied  by  reason — Reason  shows  itself  in  exchange 
—This  suffices  for  the  unconscious  cooperation  of  the  economic  body 
or  Greater  Leviathan — Of  the  three  modes  of  production,  "ex- 
changing" is  the  highest — Mistake  of  writers  on  political  economy 
—The  motive  of  exchange. 

IT  is  a  curious  fact,  having  in  it  suggestions  that  it 
would  lead  beyond  our  purpose  to  follow,  that  the  living 
things  that  come  nearest  to  the  social  organization  of  man 
are  not  those  to  whom  we  are  structurally  most  allied,  but 
those  belonging  to  a  widely  separated  genus,  that  of  insects. 
The  cooperation  by  which  ants  and  bees  build  houses  and 
construct  public  works,  procure  and  store  food,  make 
provision  for  future  needs,  rear  their  young,  meet  the 
assaults  of  enemies  and  confront  general  dangers,  gives 
to  their  social  life  a  striking  superficial  likeness  to  that  of 
human  societies,  and  brings  them  in  this  apparently  far 
closer  to  us  than  are  animals  to  whom  we  are  structurally 
more  akin. 

397 


398  THE  PRODUCTION  OF  WEALTH.          Book  III. 

The  cooperation  by  which  the  social  life  of  such  insects 
is  carried  on  seems  at  first  glance  to  be  of  the  kind  I  have 
called  directed  cooperation,  in  which  correlation  in  the 
efforts  of  individual  units  is  brought  about,  as  it  were 
from  without,  by  such  subordination  of  some  of  the  units 
to  other  units  as  secures  conscious  obedience  in  response 
to  intelligent  direction.  The  republican  monarchy  of  the 
bees  has  its  queen,  its  drones,  its  workers ;  the  ants  range 
themselves  for  march,  for  battle,  or  for  work,  in  militant 
or  industrial  armies. 

Yet  closer  observation  shows  that  this  is  more  in  seeming 
than  in  fact,  and  that  the  great  agency  in  the  correlation 
of  effort  which  the  insects  show  is  something  which 
impresses  the  units  not  from  without  but  from  within 
their  own  nature,  the  force  or  power  or  impulse  that  we 
call  instinct,  which  operating  directly  on  the  individual 
unit,  brings  each,  as  it  were,  of  its  own  volition,  to  its 
proper  place  and  function  with  relation  to  the  whole,  in 
something  of  the  same  way  in  which  the  vital  or  germinative 
force  operates  within  the  egg-shell  to  bring  the  separate 
cells  into  relations  that  result  in  the  living  bird. 

Now  of  this  power  or  impulse  that  we  call  instinct 
conscious  man  has  little.  While  the  involuntary  and 
unconscious  functions  of  his  bodily  frame  may  be  ordered 
and  maintained  by  it  or  something  akin  to  it,  and  while 
it  may  in  the  same  way  furnish  the  sub-stratum  of  what 
we  may  call  his  mental  frame,  yet  instinct,  so  strong  in 
the  orders  of  life  below  him,  seems  with  man  to  fade  and 
withdraw  as  the  higher  power  of  reason  assumes  control. 
What  of  instinct  he  retains  would  not  suffice  even  for  such 
social  constructions  as  those  of  ants  or  bees  or  beavers. 
But  reason,  which  in  him  has  superseded  instinct,  brings 
a  new  and  seemingly  illimitable  power  of  uniting  and 
correlating  individual  efforts,  by  enabling  and  disposing 
him  to  exchange  with  his  fellows.  The  act  of  exchange  is 


Chap.  XL     OFFICE  OF   EXCHANGE  IN  PRODUCTION.      399 

that  of  deliberately  parting  with  one  thing  for  the  purpose 
and  as  a  means  of  getting  another  thing.  It  is  an  act 
that  involves  foresight,  calculation,  judgment— qualities 
in  which  reason  differs  from  instinct. 

All  living  things  that  we  know  of  cooperate  in  some 
kind  and  to  some  degree.  So  far  as  we  can  see,  nothing 
that  lives  can  live  in  and  for  itself  alone.  But  man  is  the 
only  one  who  cooperates  by  exchanging,  and  he  may  be 
distinguished  from  all  the  numberless  tribes  that  with  him 
tenant  the  earth  as  the  exchanging  animal.  Of  them  all 
he  is  the  only  one  who  seeks  to  obtain  one  thing  by  giving 
another.  A  dog  may  prefer  a  big  bone  to  a  little  bone, 
and  where  it  cannot  hold  on  to  both,  may  keep  one  in 
preference  to  the  other.  But  no  dog  or  other  animal  will 
deliberately  and  voluntarily  give  up  one  desirable  thing 
for  another  desirable  thing.  When  between  two  desired 
things  the  question  a  Which?"  is  put  to  it,  its  answer  is 
always  the  answer  of  the  child,  "  Both,"  until  it  is  forced 
to  leave  the  one  in  order  to  hold  the  other.  No  other 
animal  uses  bait  to  attract  its  prey ;  no  other  animal  plants 
edible  seeds  that  it  may  gather  the  produce.  No  other 
animal  gives  another  what  it  itself  would  like  to  have  in 
order  to  receive  in  return  what  it  likes  better.  But  such 
acts  come  naturally  to  man  with  his  maturity,  and  are  of 
his  distinguishing  principle. 

Exchange  is  the  great  agency  by  which  what  I  have 
called  the  spontaneous  or  unconscious  cooperation  of  men 
in  the  production  of  wealth  is  brought  about,  and  economic 
units  are  welded  into  that  social  organism  which  is  the 
Greater  Leviathan.  To  this  economic  body,  this  Greater 
Leviathan,  into  which  it  builds  the  economic  units,  it  is 
what  the  nerves  or  perhaps  the  ganglions  are  to  the 
individual  body.  Or,  to  make  use  of  another  illustration, 
it  is  to  our  material  desires  and  powers  of  satisfying  them 
what  the  switchboard  of  a  telegraph  or  telephone  or  other 


400  THE  PRODUCTION  OF  WEALTH.          Book  III. 

electric  system  is  to  that  system,  a  means  by  which  exer- 
tion of  one  kind  in  one  place  may  be  transmuted  into  sat- 
isfaction of  another  kind  in  another  place,  and  thus  the 
efforts  of  individual  units  be  conjoined  and  correlated  so 
as  to  yield  satisfactions  in  most  useful  place  and  form,  and 
to  an  amount  enormously  exceeding  what  otherwise  would 
be  possible. 

Of  the  three  modes  of  production  which  I  have  distin- 
guished as  adapting,  growing  and  exchanging,  the  last  is 
that  by  which  alone  the  higher  applications  of  the  modes 
of  adapting  and  growing  are  made  available.  Were  it  not 
for  exchange  the  cooperation  of  individuals  in  the  produc- 
tion of  wealth  could  go  no  further  than  it  might  be  carried 
by  the  natural  instincts  that  operate  in  the  formation  of 
the  family,  or  by  that  kind  of  cooperation  in  which  indi- 
vidual wills  are  made  subordinate  to  another  individual 
will.  These  it  is  evident  would  not  suffice  for  the  lowest 
stage  of  civilization.  For  not  only  does  slavery  itself, 
which  requires  that  the  slaves  shall  be  fed  and  clothed, 
involve  some  sort  of  exchange,  though  a  very  inadequate 
one,  but  the  labor  of  slaves  must  be  supplemented  by 
exchange  to  permit  the  slave-owner  to  enjoy  any  more 
than  the  rudest  satisfactions.  It  was  only  by  exchanging 
the  produce  of  their  labor  that  the  American  slave-owner 
could  provide  himself  with  more  than  his  slaves  themselves 
could  obtain  from  his  own  plantation,  and  a  slave-based 
society  in  which  there  was  no  exchanging  could  hardly 
carry  the  arts  further  than  the  construction  of  the  rudest 
huts  and  tools.  When  we  speak  of  pyramids  and  canals 
being  constructed  by  enforced  labor  we  are  forgetting  the 
great  amount  of  exchanging  which  was  involved  in  such 
work. 

Many  if  not  most  of  the  writers  on  political  economy 
have  treated  exchange  as  a  part  of  distribution.  On  the 
contrary,  it  properly  belongs  to  production.  It  is  by 


Chap.  XL     OFFICE  OF  EXCHANGE  IN  PRODUCTION.       401 

exchange  and  through  exchange  that  man  obtains  and  is 
able  to  exert  the  power  of  cooperation  which  with  the 
advance  of  civilization  so  enormously  increases  his  ability 
to  produce  wealth. 

The  motive  of  exchange  is  the  primary  postulate  of 
political  economy,  the  universal  fact  that  men  seek  to 
gratify  their  desires  with  the  least  exertion.  This  leads 
men  by  a  universal  impulse  to  seek  to  gratify  their  desires 
by  exchange  wherever  they  can  thus  obtain  the  gratification 
of  desire  with  less  exertion  than  in  any  other  way;  and 
by  virtue  of  the  natural  laws,  both  physical  and  mental, 
explained  in  Chapter  II.  of  this  Book,  this  is  from  the  very 
origin  of  human  society,  and  increasingly  with  its  advance, 
the  easiest  way  of  procuring  the  satisfaction  of  the  greatest 
number  of  desires. 

And  in  addition  to  the  laws  already  explained  there  is 
another  law  or  condition  of  nature  related  to  man  which 
is  taken  advantage  of  to  the  enormous  increase  of  pro- 
ductive power  in  exchange.1 

1  A  note,  "  Leave  six  pages,"  written  in  pencil,  appears  on  the  last  page  of  this 
chapter  in  the  MS.  The  indications  are  that  it  was  intended  not  for  this,  but  for 
the  next  succeeding  chapter,  which  was  left  unfinished.  —  H.  Q-.,  JR. 


CHAPTER  XII. 
OFFICE  OF  COMPETITION  IN  PRODUCTION. 

SHOWING   THAT    COMPETITION    BRINGS    TRADE,   AND  CONSE- 
QUENTLY SERVICE,  TO  ITS  JUST  LEVEL. 

["Competition  is  the  life  of  trade"  an  old  and  true  adage— The  as- 
sumption that  it  is  an  evil  springs  from  two  causes — one  bad,  the 
other  good— The  bad  cause  at  the  root  of  protectionism— Law  of 
competition  a  natural  law— Competition  necessary  to  civilization.]1 

THAT  "  competition  is  the  life  of  trade,"  is  an  old  and 
true  adage.     But  in  current  thought  and   current 
literature  there  is  so  much  assumption  that  competition  is 
an  evil  that  it  is  worth  while  to  examine  at  some  length 
its  cause  and  office  in  the  production  of  wealth. 

Much  of  this  assumption  that  competition  is  an  evil  and 
a  wrong  that  should  be  restricted  and  indeed  abolished  in 
the  higher  interests  of  society  springs  from  the  desire  of 
men  unduly  to  profit  at  the  expense  of  their  fellows  by 
distorting  natural  laws  of  the  distribution  of  wealth.  This 
is  true  of  the  form  of  socialism  which  was  known  in  the 
time  of  Adam  Smith  as  the  mercantile  system  or  theory, 
and  which  still  exists  with  but  little  diminished  strength 
under  the  general  name  of  protectionism.  Much  of  it 
again  has  a  nobler  origin,  coming  from  a  righteous  in- 

1  No  summary  of  this  chapter  appears  in  the  MS.  The  summary  here  presented 
and  inclosed  by  brackets  is  supplied  for  the  reader's  convenience.  —  H.  G.,  JR. 

402 


Chap.  XIL   OFFICE  OF  COMPETITION  IN  PRODUCTION.    403 

dignation  with  the  monstrous  inequalities  in  the  existing 
distribution  of  wealth  throughout  the  civilized  world, 
coupled  with  a  mistaken  assumption  that  these  inequalities 
are  due  to  competition. 

I  do  not  propose  here  to  treat  either  of  protectionism  or 
socialism  proper,  my  purpose  being  not  that  of  controversy 
or  refutation,  but  merely  that  of  discovering  and  explaining 
the  natural  laws  with  which  the  science  of  political  economy 
is  concerned.  But  the  law  of  competition  is  one  of  these 
natural  laws,  without  an  understanding  of  which  we 
cannot  fully  understand  the  economy  or  system  by  which 
that  Intelligence  to  which  we  must  refer  the  origin  and 
existence  of  the  world  has  provided  that  the  advance  of 
mankind  in  civilization  should  be  an  advance  towards  the 
general  enjoyment  of  literally  boundless  wealth. 

The  competition  of  men  with  their  fellows  in  the  pro- 
duction of  wealth  has  its  origin  in  the  impulse  to  satisfy 
desires  with  the  least  expenditure  of  exertion. 

Competition  is  indeed  the  life  of  trade,  in  a  deeper  sense 
than  that  it  is  a  mere  facilitator  of  trade.  It  is  the  life  of 
trade  in  the  sense  that  its  spirit  or  impulse  is  the  spirit  or 
impulse  of  trade  or  exchange. 


CHAPTER  XIII. 
OF  DEMAND  AND   SUPPLY  IN  PRODUCTION.1 


1  No  more  than  the  title  of  this  chapter  was  written.  The  reader  will  find  the 
subject  of  demand  and  supply  in  production  treated  in  "Progress  and  Poverty" 
and  in  "  Social  Problems. "— H.  G.,  JR. 

404 


CHAPTER  XIV. 

ORDER  OF  THE  THREE  FACTORS  OF  PRODUC- 
TION. 

SHOWING  THE  AGREEMENT  OF  ALL  ECONOMISTS  AS  TO  THE 
NAMES  AND  ORDER  OF  THE  FACTORS  OF  PRODUCTION. 

Land  and  labor  necessary  elements  in  production— Union  of  a  com- 
posite element,  capital— Reason  for  dwelling  on  this  agreement  as 
to  order. 

LL  economists  give  the  factors  of  production  as 
three— land,  labor  and  capital.  And  without  ex- 
ception that  I  know  of,  they  name  them  in  this  order. 
This,  indeed,  is  the  natural  order  5  the  order  of  their 
appearance.  The  world,  so  far  as  political  economy  takes 
cognizance  of  it,  began  with  land.  Reason  tells  us  that 
land,  with  all  its  powers  and  potentialities,  including  even 
all  vegetable  and  animal  life,  existed  before  man  was,  and 
must  have  existed  before  he  could  be.  But  whether  still 
"  formless  and  void,"  or  already  instinct  with  the  lower 
forms  of  life,  so  long  as  there  was  in  the  world  only  the 
economic  element  land,  production  in  the  economic  sense 
could  not  be,  and  there  was  no  wealth.  When  man 
appeared,  and  the  economic  element  labor  was  united  to 
the  economic  element  land,  production  began,  and  its 
product,  wealth,  resulted.  At  length  (for  in  the  myths 
and  poems  in  which  mankind  have  expressed  all  the 
wisest  could  tell  of  our  far  beginnings  they  have  always 

405 


406  THE  PRODUCTION  OF  WEALTH.          Boole  III. 

loved  to  picture  a  golden  age  devoid  of  care),  or  more 
probably  almost  immediately  (for  tlie  very  first  of  our 
race  must  have  possessed  that  reason  which  is  the 
distinguishing  quality  of  man),  the  greater  power  that 
could  be  gained  by  using  wealth  in  aid  of  labor  was  seen, 
and  a  third  factor  of  production,  capital,  appeared. 

But  between  this  third  factor  and  the  two  factors  which 
precede  it,  a  difference  in  nature  and  importance  is  to  be 
noted.  Land  and  labor  are  original  and  necessary  factors. 
They  cannot  be  resolved  into  each  other,  and  they  are 
indispensable  to  production,  being  necessary  to  production 
in  all  its  modes.  But  capital  is  not  an  original  factor. 
It  is  a  compound  or  derivative  factor,  resulting  from  the 
union  of  the  two  original  factors,  land  and  labor,  and 
being  resolvable  on  final  analysis  into  a  form  of  the  active 
factor,  labor.  It  is  not  indispensable  to  production, 
being  necessary,  as  before  explained,  not  in  all  modes  of 
production,  but  only  in  some  modes.  Nevertheless,  «the 
part  that  it  bears  in  production  is  so  separable,  and  the 
convenience  that  is  served  by  distinguishing  it  from 
the  original  factors  is  so  great,  that  it  has  been  properly 
recognized  by  the  earliest  and  by  all  subsequent  writers 
in  political  economy  as  a  separate  factor ;  and  the  three 
elements  by  whose  union  wealth  is  produced  in  the  civilized 
state  are  given  by  the  names  and  in  the  order  of  (1)  land, 
(2)  labor,  and  (3)  capital. 

It  may  seem  to  the  reader  superfluous  that  I  should  lay 
such  stress  upon  the  order  of  the  three  factors  of  production, 
for  it  is  not  more  self-evident  that  the  mother  must  precede 
the  child  than  that  land  must  precede  labor,  and  that  labor 
must  precede  capital.  But  I  dwell  upon  this  question  of 
order  because  it  is  the  key  to  confusions  which  have 
brought  the  teaching  of  the  science  of  political  economy 
to  absurdity  and  stultification.  Such  of  these  writers  as 
have  condescended  to  make  any  definitions  of  the  terms 


Chap.  Xir.          THREE   FACTORS   OF   PRODUCTION.          407 

they  use  have  indeed  in  these  definitions  recognized  the 
natural  order  of  the  three  factors  of  production.  But 
whoever  will  follow  them  will  see  that  without  seeming 
conscious  of  it  themselves  they  soon  slip  into  a  reversal  of 
this  order,  and,  literally  making  the  last  first,  proceed  to 
assume  that  capital  is  the  prime  factor  in  production.  So- 
cialism, which  gives  such  undue  prominence  to  capital  and 
yet  is  so  completely  at  sea  as  to  the  real  nature  and  func- 
tions of  capital  has  the  root  of  its  absurdities  in  the  teach- 
ings of  the  scholastic  economists. 

But  the  results  of  this  confusion  as  to  the  nature  and 
order  of  the  factors  of  production  will  be  more  fully  treated 
when  we  come  to  consider  the  distribution  of  wealth.  All 
that  it  is  necessary  to  do  here  is  to  point  out  the  true  order 
of  the  factors  of  production  and  to  make  clear  what  they 
are.  Let  us  proceed  to  consider  them  one  by  one. 


OF  TBB 

UNIVERSITY 


CHAPTER  XV. 
THE  FIRST  FACTOR  OF  PRODUCTION- LAND. 

SHOWING  THAT  LAND  IS  THE  NATURAL  OR  PASSIVE  FACTOR 
IN  ALL  PRODUCTION. 

The  term  "land"— "Landowners"— Labor  the  only  active  factor. 

MAN  produces  by  drawing  from  nature.  Land,  in 
political  economy,  is  the  term  for  that  from  which 
he  draws— for  that  which  must  exist  before  he  himself  can 
exist.  In  other  words,  the  term  land  in  political  economy 
means  the  natural  or  passive  element  in  production,  and 
includes  the  whole  external  world  accessible  to  man,  with 
all  its  powers,  qualities  and  products,  except  perhaps  those 
portions  of  it  which  are  for  the  time  included  in  man's 
body  or  in  his  products,  and  which  therefore  temporarily 
belong  to  the  categories,  man  and  wealth,  passing  again 
in  their  re-absorption  by  nature  into  the  category,  land. 

The  original  and  ordinary  meaning  of  the  word,  land, 
is  that  of  dry  superficies  of  the  earth  as  distinguished  from 
water  or  air.  But  man,  as  distinguished  from  the  denizens 
of  the  water  or  the  air,  is  primarily  a  land  animal.  The 
dry  surface  of  the  earth  is  his  habitat,  from  which  alone 
he  can  venture  upon  or  make  use  of  any  other  element,  or 
obtain  access  to  any  other  material  thing  or  potency. 
Thus,  as  a  law  term,  land  means  not  merely  the  dry 
superficies  of  the  earth,  but  all  that  is  above  and  all  that 

408 


Chap.  XV.     FIRST  FACTOR  OF  PRODUCTION— LAND.     409 

may  be  below  it,  from  zenith  to  nadir.  For  the  same 
reason  the  word  land  receives  like  extension  of  meaning 
when  used  as  a  term  of  political  economy,  and  comprises 
all  having  material  form  that  man  has  received  or  can 
receive  from  nature,  that  is  to  say,  from  God. 

Thus  the  term  "land"  in  political  economy  means  the 
natural  or  passive  factor,  on  which  and  by  or  through 
which  labor  produces,  and  can  alone  produce. 

But  that  land  is  only  a  passive  factor  in  production 
must  be  carefully  kept  in  mind.  It  is  a  thing,  but  not  a 
person,  and  though  the  tendency  to  personification  leads 
not  merely  in  poetry  but  in  common  speech  to  the  use  of 
phrases  which  attribute  sentiment  and  action  to  land,  it  is 
important  to  remember  that  when  we  speak  of  a  smiling, 
a  sullen,  or  an  angry  landscape,  of  a  generous  or  a  niggard 
land,  of  the  earth  giving  or  the  earth  receiving,  or  rewarding 
or  denying,  or  of  nature  tempting  or  forbidding,  aiding  or 
preventing,  we  are  merely  using  figures  of  speech  more 
forcibly  or  more  gracefully  to  express  our  own  feelings  by 
reflection  from  inanimate  objects.  In  the  production  of 
wealth  land  cannot  act ;  it  can  only  be  acted  upon.  Man 
alone  is  the  actor. 

Nor  is  this  principle  changed  or  avoided  when  we  use 
the  word  land  as  expressive  of  the  people  who  own  land. 
Landowners,  as  landowners,  are  as  purely  passive  in 
production  as  land  itself ;  they  take  no  part  in  production 
whatever.  When  Arthur  Young  spoke  of  the  "  magic  of 
property  turning  sands  to  gold "  he  was  using  a  figure 
of  speech.  What  he  meant  to  say  was  that  the  effect  of 
security  in  the  enjoyment  of  the  produce  of  labor  on  land 
was  to  induce  men  to  exert  that  labor  with  more  assiduity 
and  intelligence,  and  thus  to  increase  the  produce.  Land 
cannot  know  whether  men  regard  it  as  property  or  not, 
nor  does  that  fact  in  any  degree  affect  its  powers.  Sand 
is  sand  and  gold  is  gold,  and  the  rain  falls  and  the  sun 


410  THE  PRODUCTION  OF  WEALTH.          Book  IIL 

shines,  as  little  affected  by  the  moral  considerations  that 
men  recognize  as  the  telegraph-wire  is  affected  by  the 
meaning  of  the  messages  that  pass  through  it,  or  as  the 
rock  is  affected  by  the  twitter  of  the  birds  that  fly  over  it. 

I  speak  of  this  because  although  their  definition  of  land 
as  a  factor  in  production  is  precisely  that  which  I  have 
given,  there  is  to  be  found  in  the  accepted  treatises  on 
political  economy  a  constant  tendency  to  the  assumption 
that  landowners,  through  their  ownership  of  land,  con- 
tribute to  production. 

That  the  persons  whom  we  call  landowners  may  con- 
tribute their  labor  or  their  capital  to  production  is  of 
course  true,  but  that  they  should  contribute  to  production 
as  landowners,  and  by  virtue  of  that  ownership,  is  as 
ridiculously  impossible  as  that  the  belief  of  a  lunatic  in 
his  ownership  of  the  moon  should  be  the  cause  of  her 
brilliancy. 

We  could  not  if  we  would,  and  should  not  if  we  could, 
utterly  eschew  metaphors;  but  in  political  economy  we 
must  be  always  careful  to  hold  them  at  their  true  meaning. 


CHAPTER  XVI. 
THE  SECOND  FACTOR  OF  PRODUCTION— LABOR. 

SHOWING  THAT    LABOR  IS  THE    HUMAN   OB  ACTIVE    FACTOR 
IN  ALL  PRODUCTION. 

The  term  labor— It  is  the  only  active  factor  in  producing  wealth, 
and  by  nature  spiritual. 

ALL  human  actions,  or  at  least  all  conscious  human 
XX  actions,  have  their  source  in  desire  and  their  end  or 
aim  in  the  satisfaction  of  desire.  The  intermediary  action 
by  which  desire  secures  its  aim  in  satisfaction,  is  exertion. 
The  economic  term  for  this  exertion  is  labor.  It  is  the 
active,  and  from  the  human  standpoint,  the  primary  or 
initiative,  factor  in  all  production— that  which  being 
applied  to  land  brings  about  all  the  changes  conducive  to 
the  satisfaction  of  desire  that  it  is  possible  for  man  to 
make  in  the  material  world. 

In  political  economy  there  is  no  other  term  for  this 
exertion  than  labor.  That  is  to  say,  the  term  labor 
includes  all  human  exertion  in  the  production  of  wealth, 
whatever  its  mode.  In  common  parlance  we  often  speak 
of  brain  labor  and  hand  labor  as  though  they  were  entirely 
distinct  kinds  of  exertion,  and  labor  is  often  spoken  of  as 
though  it  involved  only  muscular  exertion.  But  in  reality 
any  form  of  labor,  that  is  to  say,  any  form  of  human 
exertion  in  the  production  of  wealth  above  that  which 

411 


412  THE  PKODUCTION  OF  WEALTH.          Book  III. 

cattle  may  be  applied  to  doing,  requires  the  human  brain 
as  truly  as  the  human  hand,  and  would  be  impossible 
without  the  exercise  of  mental  faculties  on  the  part  of  the 
laborer. 

Labor  in  fact  is  only  physical  in  external  form.  In  its 
origin  it  is  mental  or  on  strict  analysis  spiritual.  It  is 
indeed  the  point  at  which,  or  the  means  by  which,  the 
spiritual  element  which  is  in  man,  the  Ego,  or  essential, 
begins  to  exert  its  control  on  matter  and  motion,  and  to 
modify  the  material  world  to  its  desires. 

As  land  is  the  natural  or  passive  factor  in  all  production, 
so  labor  is  the  human  or  active  factor.  As  such,  it  is  the 
initiatory  factor.  All  production  results  from  the  action 
of  labor  on  land,  and  hence  it  is  truly  said  that  labor  is 
the  producer  of  all  wealth. 


CHAPTER   XVII. 
THE  THIRD  FACTOR  OF  PRODUCTION— CAPITAL. 

SHOWING  THAT  CAPITAL  IS  NOT  A  PRIMARY  FACTOR,  BUT 
PROCEEDS  FROM  LAND  AND  LABOR,  AND  IS  A  FORM  OR 
USE  OF  WEALTH. 

Capital  is  essentially  labor  raised  to  a  higher  power— Where  it  may, 
and  where  it  must  aid  labor— In  itself  it  is  helpless. 

rilHE  primary  factors  of  production  are  labor  and  land, 
JL  and  from  their  union  all  production  comes.  Their 
concrete  product  is  wealth,  which  is  land  modified  by  labor 
so  as  to  fit  it  or  better  fit  it  for  the  satisfaction  of  human 
desires.  What  is  usually  distinguished  as  the  third  factor 
of  production,  capital,  is,  as  we  have  seen,  a  form  or  use 
of  wealth. 

Capital,  which  is  not  in  itself  a  distinguishable  element, 
but  which  it  must  always  be  kept  in  mind  consists  of  wealth 
applied  to  the  aid  of  labor  in  further  production,  is  not  a 
primary  factor.  There  can  be  production  without  it,  and 
there  must  have  been  production  without  it,  or  it  could 
not  in  the  first  place  have  appeared.  It  is  a  secondary 
and  compound  factor,  coming  after  and  resulting  from  the 
union  of  labor  and  land  in  the  production  of  wealth.  It 
is  in  essence  labor  raised  by  a  second  union  with  land  to 
a  third  or  higher  power.  But  it  is  to  civilized  life  so 
necessary  and  important  as  to  be  rightfully  accorded  in 

413 


414  THE  PRODUCTION  OF  WEALTH.          Book  III. 

political  economy  the  place  of  a  third  factor  in  production. 
Without  the  use  of  capital  man  could  raise  himself  but 
little  above  the  level  of  the  animals. 

I  have  already,  in  Chapter  II.  of  this  Book,  generalized 
the  various  modes  of  production  into  three,  adapting, 
growing  and  exchanging.  Now  in  the  first  of  these  modes, 
which  I  have  called  adapting,  the  changing  of  natural 
products  either  in  form  or  in  place  so  as  to  fit  them  for 
the  satisfaction  of  human  desires,  capital  may  aid  labor, 
and  in  the  higher  forms  of  this  mode  must  aid  labor. 
But  it  is  not  absolutely  necessary,  to  the  lower  forms  at 
least.  Some  of  the  smaller  and  less  powerful  animals 
might  be  taken  and  the  natural  fruits  and  vegetables 
obtained,  some  rude  shelter  and  clothing  produced,  and 
even  some  rude  forms  of  wealth  adapted  from  the  mineral 
world,  without  the  application  of  capital. 

But  in  the  second  and  third  of  these  modes,  those  namely 
of  growing  and  exchanging,  capital  must  aid  labor,  or  is 
indispensable.  For  there  can  be  no  cultivation  of  plants 
or  breeding  of  animals,  unless  vegetables  or  animals 
previously  brought  into  the  category  of  wealth  are  devoted 
not  to  the  consumption  that  gives  direct  satisfaction  to 
desire,  but  to  the  production  of  more  wealth ;  and  there 
can  be  no  exchanging  of  wealth  until  some  wealth  is 
applied  by  its  owners,  not  to  consumption,  but  to  exchange 
for  other  wealth  or  for  services. 

It  is  to  be  observed  that  capital  of  itself  can  do  nothing. 
It  is  always  a  subsidiary,  never  an  initiatory  factor.  The 
initiatory  factor  is  always  labor.  That  is  to  say,  in  the 
production  of  wealth  labor  always  uses  capital,  is  never 
used  by  capital.  This  is  not  merely  literally  true,  when 
by  the  term  capital  we  mean  the  thing  capital.  It  is  also 
true  when  we  personify  the  term  and  mean  by  it  not  the 
thing  capital,  but  the  men  who  are  possessed  of  capital. 
The  capitalist  pure  and  simple,  the  man  who  merely  controls 


Cliap.XVIL         THE  THIRD  FACTOR-CAPITAL.  415 

capital,  has  in  his  hands  the  power  of  assisting  labor  to 
produce.  But  purely  as  capitalist  he  cannot  exercise  that 
power.  It  can  be  exercised  only  by  labor.  To  utilize  it 
he  must  himself  exercise  at  least  some  of  the  functions  of 
labor,  or  he  must  put  his  capital,  on  some  terms,  at  the  use 
of  those  who  do. 

I  speak  of  this  because  it  is  the  habit,  not  only  of 
common  speech  but  of  many  writers  on  political  economy, 
to  speak  as  though  capital  were  the  initiatory  factor  in 
production,  and  as  if  capital  or  capitalists  employed  labor ; 
whereas  in  fact,  no  matter  what  the  form  of  the  arrange- 
ment for  the  use  of  capital,  it  is  always  labor  that  starts 
production  and  is  aided  by  capital;  never  capital  that 
starts  production  and  is  aided  by  labor. 

It  cannot  be  too  clearly  kept  in  mind  that  labor  is  the 
only  producer  either  of  wealth  or  of  capital.  Appropriation 
can  produce  nothing.  Its  sole  power  is  that  of  affecting 
distribution  under  penalty  of  preventing  production.  This 
may  put  wealth  or  capital  in  the  hands  of  the  appropriator, 
by  taking  it  from  others;  but  can  never  bring  it  into 
existence. 


BOOK  IV. 


THE  DISTRIBUTION  OF  WEALTH 


For  "  Mars  is  a  tyrant,"  as  Timotheus  ex- 
presses it ;  but  justice,  according  to  Pindar, 
"is  the  rightful  sovereign  of  the  world." 
The  things  which  Homer  tells  us  kings 
receive  from  Jove  are  not  machines  for 
taking  towns  or  ships  with  brazen  beaks, 
but  law  and  justice;  these  they  are  to 
guard  and  cultivate.  And  it  is  not  the 
most  warlike,  the  most  violent  and  san- 
guinary, but  the  justest  of  princes,  whom 
he  calls  the  disciple  of  Jupiter.—  Plutarch, 
Demetrius. 


CONTENTS  OF  BOOK  IV. 

THE  DISTRIBUTION  OF  WEALTH. 


PAGE 

INTRODUCTION  TO  BOOK  IV 421 

CHAPTER  I. 
THE  MEANING  OF  DISTRIBUTION. 

SHOWING  THE  MEANING  AND  USES  OF  THE  WORD  DISTRIBUTION  ; 
THE  PLACE  AND  MEANING  OF  THE  ECONOMIC  TERM  ;  AND  THAT 
IT  IS  CONCERNED  ONLY  WITH  NATURAL  LAWS. 

Derivation  and  uses  of  the  word — Exchange,  consumption  and 
taxation  not  proper  divisions  of  political  economy — Need  of  a 
consideration  of  distribution — It  is  the  continuation  and  end 
of  what  begins  in  production,  and  thus  the  final  division  of 
political  economy — The  meaning  usually  assigned  to  distribu- 
tion as  an  economic  term,  and  its  true  meaning  .  .  .  423 

CHAPTER  II. 
THE  NATURE  OF  DISTRIBUTION. 

SHOWING  THE  FALLACY  OF  THE  CONTENTION  THAT  DISTRIBUTION 
IS  A  MATTER  OF  HUMAN  LAW;  THAT  THE  NATURAL  LAWS  OF 
DISTRIBUTION  ARE  MANIFEST  NOT  ON  WEALTH  ALREADY  PRO- 
DUCED, BUT  ON  SUBSEQUENT  PRODUCTION  ;  AND  THAT  THEY  ARE 
MORAL  LAWS. 

John  Stuart  Mill's  argument  that  distribution  is  a  matter  of  hu- 
man law — Its  evidence  of  the  unscientific  character  of  the 
scholastic  economy — The  fallacy  it  involves  and  the  confusion 
it  shows — Illustration  from  Bedouin  and  from  civilized  society 
— Natural  laws  of  distribution  do  not  act  upon  wealth  already 
produced,  but  on  future  production — Reason  of  this — Illustra- 
tion of  siphon  and  analogy  of  blood  .....  430 

419 


420  CONTENTS  OF  BOOK  IV. 


CHAPTER  III. 

THE  COMMON  PERCEPTION  OF  NATURAL  LAW  IN 
DISTRIBUTION. 

SHOWING    THE    COMMON  AND   INERADICABLE   PERCEPTION   OF 

NATURAL   LAWS   OF   DISTRIBUTION. 

PAGE 

Mill's  admission  of  natural  law  in  his  argument  that  distribution 
is  a  matter  of  human  law — Sequence  and  consequence — Human 
will  and  the  will  manifest  in  nature — Inflexibility  of  natural 
laws  of  distribution — Human  will  powerless  to  affect  distribu- 
tion— This  shown  by  attempts  to  affect  distribution  through 
restriction  of  production — Mill's  confusion  and  his  high  char- 
acter ...........  440 

CHAPTER  IV. 

THE  REAL  DIFFERENCE  BETWEEN  LAWS  OF 
PRODUCTION  AND  OF  DISTRIBUTION. 

SHOWING  THAT   DISTRIBUTION   HAS  REFERENCE  TO  ETHICS, 
WHILE   PRODUCTION   HAS  NOT. 

The  laws  of  production  are  physical  laws ;  the  laws  of  distribu- 
tion moral  laws,  concerned  only  with  spirit — This  the  reason 
why  the  immutable  character  of  the  laws  of  distribution  is  more 
quickly  and  clearly  recognized 450 

CHAPTER  V. 
OF  PROPERTY. 

SHOWING  THAT  PROPERTY  DEPENDS  UPON  NATURAL  LAW. 

The  law  of  distribution  must  be  the  law  which  determines  owner- 
ship— John  Stuart  Mill  recognizes  this ;  but  extending  his  error, 
treats  property  as  a  matter  of  human  institution  solely — His 
assertion  quoted  and  examined — His  utilitarianism — His 
further  contradictions 454 

CHAPTER  VI. 
CAUSE  OF  CONFUSION  AS  TO  PROPERTY. 

SHOWING  WHY  AND  HOW  POLITICAL  ECONOMISTS  FELL  INTO 
SUCH  CONFUSIONS  WITH  REGARD  TO  PROPERTY. 

Mill  blinded  by  the  pre-assumption  that  land  is  property — He  all 
but  states  later  the  true  principle  of  property,  but  recovers  by 
substituting  in  place  of  the  economic  term  "  land,"  the  word  in 
its  colloquial  use — The  different  senses  of  the  word  illustrated 
from  the  shore  of  New  York  harbor — Mill  attempts  to  justify 
property  in  land,  but  succeeds  only  in  justifying  property  in 
wealth  460 


INTRODUCTION  TO  BOOK  IV. 

IN  accordance  with  the  earlier  usage  I  have  planned 
the  division  of  political  economy  for  purposes  of  in- 
vestigation into  three  grand  divisions:  I. — The  nature  of 
wealth.  II.— The  laws  of  production.  III.— The  laws  of 
distribution.  Having  passed  through  the  first  two  grand 
divisions,  having  seen  the  nature  of  wealth  and  the  laws  of 
its  production,  we  proceed  now  to  the  laws  of  distribution. 
In  the  branch  of  political  economy  to  which  we  now 
turn  lies  the  heart  of  all  economic  controversies.  For  all 
disputes  as  to  the  nature  of  wealth  and  all  disputes  as  to 
the  production  of  wealth  will  be  found  at  last  to  have  their 
real  ground  in  the  distribution  of  wealth.  Hence,  this,  as 
we  shall  find,  is  the  part  of  political  economy  most  beset 
with  confusions.  But  if  we  move  carefully,  making  sure 
as  we  go  of  the  meaning  of  the  words  we  use,  we  shall 
find  no  real  difficulty. 


CHAPTER  I. 
THE  MEANING  OF  DISTRIBUTION. 

SHOWING  THE  MEANING  AND  USES  OF  THE  WORD  DISTRIBU- 
TION ;  THE  PLACE  AND  MEANING  OP  THE  ECONOMIC  TERM ; 
AND  THAT  IT  IS  CONCERNED  ONLY  WITH  NATURAL  LAWS. 

Derivation  and  uses  of  the  word — Exchange,  consumption  and  taxation 
not  proper  divisions  of  political  economy— Need  of  a  consideration 
of  distribution — It  is  the  continuation  and  end  of  what  begins  in 
production,  and  thus  the  final  division  of  political  economy— The 
meaning  usually  assigned  to  distribution  as  an  economic  term,  and 
its  true  meaning. 

THE  word  distribution  comes  from  the  Latin,  dis, 
asunder,  and  tribuo,  to  give,  or  tribuere,  to  allot. 

The  common  meaning  of  distribution  differs  from  that 
of  division  by  including  with  the  idea  of  a  separation  into 
parts  the  idea  of  an  apportionment  or  allotment  of  these 
parts,  and  is  that  of  a  division  into  or  a  division  among. 

Thus  the  distribution  of  work,  or  duty,  or  function  is 
the  assignment  to  each  cooperator  of  a  separate  part  in 
securing  an  aggregate  result ;  the  distribution  of  food,  or 
alms,  or  of  a  trust  fund,  involves  the  allotment  of  a  proper 
portion  of  the  whole  to  each  of  the  beneficiaries;  the 
distribution  of  gas,  or  water,  or  heat,  or  electricity,  through 
a  building  or  city,  means  the  causing  of  a  flow  to  each 
part  of  its  proper  quota ;  the  distribution  of  rocks,  plants 
or  animals  over  the  globe  involves  the  idea  of  causes  or 

423 


424  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

laws  which  have  brought  them  to  the  places  where  they 
are  found  j  the  distribution  of  weight  or  strain  in  a  building 
or  structure  involves  the  idea  of  a  division  of  the  aggregate 
mass  or  pressure  among  the  various  parts  j  distribution  in 
logic  is  the  application  of  a  term  to  all  members  of  a  class 
taken  separately,  so  that  what  is  affirmed  or  denied  of 
the  whole  is  not  merely  affirmed  or  denied  of  them  all 
collectively,  but  of  each  considered  independently;  the 
distribution  of  things  into  categories,  or  species,  or  genera, 
in  the  sciences  is  the  cataloguing  of  them  with  reference 
to  their  likeness  or  unlikeness  in  certain  respects  of  form, 
origin  or  quality. 

What  is  called  the  distribution  of  mail  in  a  post-office  is 
the  reverse,  or  complement,  of  what  is  called  the  collection 
of  mail.  It  consists  of  the  separation  into  pouches  or  bags 
according  to  the  common  destination  of  the  mail  matter 
brought  in  for  transmission,  or  of  a  similar  separation  of 
the  mail  matter  received  for  delivery. 

What  is  called  the  distribution  of  type  in  a  printing-office 
is  the  reverse,  or  the  complement,  of  what  is  called  the 
composition  of  type.  In  composition  the  printer  places 
into  a  "stick"  the  letters  and  spaces  in  the  sequence 
that  forms  words.  One  line  composed  and  "  justified  "  by 
such  changes  in  spacing  as  bring  it  to  the  exact  "  measure," 
he  proceeds  to  compose  another  line.  When  his  stick 
contains  as  many  lines  as  it  will  conveniently  hold  he 
"empties"  it  on  a  "galley,"  from  which  this  "matter"  is 
finally  "  imposed  "  in  a  "  form."  As  many  impressions  as 
are  desired  having  been  made  from  the  "  form  "  upon  paper 
(or  upon  a  "  matrix  "  if  any  process  of  stereotyping  is  used), 
what  until  put  to  its  destined  use  of  printing  was  "live 
matter "  becomes  in  the  terminology  of  the  printing-office 
"  dead  matter,"  and  that  the  movable  types  may  be  used 
again  in  composition  the  printer  proceeds  to  distribute 
them.  If  the  matter  has  been  thrown  into  "pi"  by  an 


Chap.  L          THE  MEANING  OF  DISTRIBUTION.  425 

accident  which  disarranges  the  order  of  the  letters  in 
words,  "distribution"  is  a  very  tedious  operation,  since 
each  letter  has  to  be  separately  noted.  But  if  not,  the 
compositor,  now  become  distributor,  takes  in  his  left  hand 
so  that  he  can  read  as  much  of  the  "dead  matter"  as  he 
can  conveniently  hold,  and  beginning  at  the  right  end  of 
the  upper  line  lifts  with  the  forefinger  and  thumb  of  his 
right  hand  a  word  or  words,  reading  with  a  quick  glance 
as  he  does  so,  and  moving  his  hand  over  the  case,  releases 
each  letter  or  space  or  "  quad  "  (blank)  over  its  appropriate 
box,  from  which  they  may  be  readily  taken  for  renewed 
composition. 

This  is  the  system  of  composing  and  distributing  type 
in  use  from  the  time  of  Gutenberg  to  the  present  day. 
But  printing-machines  are  now  (1896)  rapidly  beginning 
to  supersede  hand- work.  In  these,  composition  takes  place 
by  touches  on  a  keyboard,  like  that  of  a  typewriter.  In 
the  type-using  machines  the  touch  on  a  key  brings  the 
letter  into  place,  justification  is  made  afterwards  by  hand, 
and  distribution  is  accomplished  by  revolving  the  type 
around  a  cylinder  where  by  nicks  on  its  body  it  is  carried 
to  its  appropriate  receptacle.  In  the  type-casting  machines, 
each  type  is  cast  as  the  key  is  touched,  and  instead  of  being 
distributed  is  re-melted.  In  the  line-making  machines,  or 
linotypes,  the  composition  is  of  movable  matrices,  the  line 
is  automatically  justified  by  wedges  which  increase  or 
diminish  the  space  between  the  words,  and  is  cast  on  the 
face  of  a  "  slug"  by  a  jet  of  molten  metal.  In  these  there 
is  no  distribution  ;  the  slugs  when  no  longer  needed  being 
thrown  into  the  melting-pot. 

As  has  already  been  observed,  the  distribution  of  wealth 
in  political  economy  does  not  include  transportation  and 
exchange,  as  most  of  the  standard  economic  writers 
assume.  Nor  yet  is  there  any  logical  reason  for  treating 
exchange  as  a  separate  department  in  political  economy,  as 


426  THE  DISTRIBUTION  OF   WEALTH.         Book  IV. 

is  done  by  those  writers  who  define  political  economy  as 
the  science  which  teaches  of  the  laws  which  regulate  the 
production,  distribution  and  exchange  of  wealth,  or  as 
they  sometimes  phrase  it,  of  the  production,  exchange  and 
distribution  of  wealth.  Transportation  and  exchange  are 
properly  included  in  production,  being  a  part  of  the 
process  in  which  natural  objects  are  by  the  exertion  of 
human  labor  better  fitted  to  satisfy  the  desires  of  man. 

Nor  yet  again  is  there  any  logical  reason  in  the  division 
of  the  field  of  the  science  of  political  economy  for  following 
that  department  which  treats  of  the  distribution  of  wealth 
with  other  departments  treating  of  the  consumption  of 
wealth  or  of  taxation,  as  is  done  by  some  of  the  minor  and 
more  recent  writers.  Taxation  is  a  matter  of  human  law, 
while  the  proper  subject  of  science  is  natural  law.  Nor 
does  the  science  of  political  economy  concern  itself  with 
consumption.  It  is  finished  and  done— the  purpose  for 
which  production  began  is  concluded  when  it  reaches 
distribution. 

The  need  of  a  consideration  of  the  distribution  of  wealth 
in  political  economy  comes  from  the  cooperative  character 
of  the  production  of  wealth  in  civilization.  In  the  rudest- 
state  of  humanity,  where  production  is  carried  on  by 
isolated  human  units,  the  product  of  each  unit  would  in 
the  act  of  production  come  into  possession  of  that  unit, 
and  there  would  be  no  distribution  of  wealth  and  no  need 
for  considering  it.*  But  in  that  higher  state  of  humanity 
where  separate  units,  each  moved  to  action  by  the  motive 
of  satisfying  its  individual  desires,  cooperate  to  produc- 
tion, there  necessarily  arises  when  the  product  has  been 
obtained,  the  question  of  its  distribution. 

Distribution  is  in  fact  a  continuation  of  production— the 
latter  part  of  the  same  process  of  which  production  is  the 

*  Book  I.,  Chapter  I. 


Chap.  1.          THE  MEANING  OF  DISTRIBUTION.  427 

first  part.  For  the  desire  which  prompts  to  exertion  in 
production  is  the  desire  for  satisfaction,  and  distribution 
is  the  process  by  which  what  is  brought  into  being  by 
production  is  carried  to  the  point  where  it  yields  satisfaction 
to  desire— which  point  is  the  end  and  aim  of  production. 

In  a  logical  division  of  the  field  of  political  economy, 
that  which  relates  to  the  distribution  of  wealth  is  the  final 
part.  For  the  beginning  of  all  the  actions  and  movements 
which  political  economy  is  called  on  to  consider  is  in 
human  desire.  And  their  end  and  aim  is  the  satisfaction  of 
that  desire.  When  this  is  reached  political  economy  is 
finished,  and  this  is  reached  with  the  distribution  of  wealth. 
With  what  becomes  of  wealth  after  it  is  distributed  polit- 
ical economy  has  nothing  whatever  to  do.  It  can  take 
any  further  account  of  it  only  should  it  be  reentered  in 
the  field  of  political  economy  as  capital,  and  then  only  as 
an  original  and  independent  entry.  What  men  choose  to 
do  with  the  wealth  that  is  distributed  to  them  may  be  of 
concern  to  them  as  individuals,  or  it  may  be  of  concern  to 
the  society  of  which  they  are  a  part,  but  it  is  of  no  concern 
to  political  economy.  The  branches  of  knowledge  that 
consider  the  ultimate  disposition  of  wealth  may  be 
instructive  or  useful.  But  they  are  not  included  in  political 
economy,  which  does  not  embrace  all  knowledge  or  any 
knowledge,  but  has  as  a  separate  science  a  clear  and  well- 
defined  field  of  its  own. 

If,  moved  by  a  desire  for  potatoes,  I  dig,  or  plant,  or 
weed,  or  gather  them,  or  as  a  member  of  the  great 
cooperative  association,  the  body  economic,  in  which 
civilization  consists,  I  saw  or  plane,  or  fish  or  hunt,  or 
play  the  fiddle,  or  preach  sermons  for  the  satisfaction  of 
other  people  who  in  return  will  give  me  potatoes  or  the 
means  of  getting  potatoes,  the  whole  transaction  originat- 
ing in  my  desire  for  potatoes  is  finished  when  I  get  the 
potatoes,  or  rather  when  they  are  put  at  my  disposal  at 


428  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

the  place  contemplated  in  my  desire.  Whether  I  then 
choose  to  boil,  bake,  roast  or  fry  them,  to  throw  them  at 
dogs  or  to  feed  them  to  hogs,  to  plant  them  as  seed,  or  to 
let  them  decay  j  to  trade  them  off  for  other  food  or  other 
satisfactions,  or  to  transfer  them  to  some  one  else  as  a 
free  gift  or  under  promise  that  by  and  by  he  will  give  me 
other  potatoes  or  other  satisfactions,  is  something  outside 
of  and  beyond  the  series  of  transactions  which  originating 
in  my  desire  for  potatoes  was  ended  and  finished  in  my 
getting  potatoes. 

As  a  term  of  political  economy,  distribution  is  usually 
said  to  mean  the  division  of  the  results  of  production 
among  the  persons  or  classes  of  persons  who  have 
contributed  to  production.  But  this  as  we  shall  see  is 
misleading,  its  real  meaning  being  the  division  into 
categories  corresponding  to  the  categories  or  factors  of 
production. 

In  entering  on  this  branch  of  our  inquiry,  it  will  be 
well  to  recall  what,  in  Book  I.,  I  have  dwelt  upon  at  length, 
and  what  is  here  particularly  needful  to  keep  in  mind,  that 
the  laws  which  it  is  the  proper  purpose  of  political  economy 
to  discover  are  not  human  laws,  but  natural  laws.  From 
this  it  follows  that  our  inquiry  into  the  laws  of  the 
distribution  of  wealth  is  not  an  inquiry  into  the  municipal 
laws  or  human  enactments  which  either  here  and  now,  or 
in  any  other  time  and  place,  prescribe  or  have  prescribed 
how  wealth  shall  be  divided  among  men.  With  them  we 
have  no  concern,  unless  it  may  be  for  purposes  of  illus- 
tration. What  we  have  to  seek  are  those  laws  of  the 
distribution  of  wealth  which  belong  to  the  natural  order— 
laws  which  are  a  part  of  that  system  or  arrangement  which 
constitutes  the  social  organism  or  body  economic,  as 
distinguished  from  the  body  politic  or  state,  the  Greater 
Leviathan  that  makes  its  appearance  with  civilization  and 
develops  with  its  advance.  These  natural  laws  are  in  all 


Chap.  I.          THE   MEANING  OF   DISTRIBUTION.  429 

times  and  places  the  same,  and  though  they  may  be  crossed 
by  human  enactment,  can  never  be  annulled  or  swerved 
by  it. 

It  is  more  needful  to  call  this  to  mind,  because  in  what 
have  passed  for  systematic  treatises  on  political  economy 
the  fact  that  it  is  with  natural  laws,  not  human  laws,  that 
the  science  of  political  economy  is  concerned,  has  in  treat- 
ing of  the  distribution  of  wealth  been  utterly  ignored, 
and  even  flatly  denied. 


CHAPTER  II. 
THE  NATURE  OF  DISTRIBUTION. 

SHOWING  THE  FALLACY  OF  THE  CONTENTION  THAT 
DISTRIBUTION  IS  A  MATTER  OF  HUMAN  LAW;  THAT 
THE  NATURAL  LAWS  OF  DISTRIBUTION  ARE  MANIFEST 
NOT  ON  WEALTH  ALREADY  PRODUCED,  BUT  ON  SUBSE- 
QUENT PRODUCTION ;  AND  THAT  THEY  ARE  MORAL  LAWS. 

John  Stuart  Mill's  argument  that  distribution  is  a  matter  of  human 
law — Its  evidence  of  the  unscientific  character  of  the  scholastic 
economy— The  fallacy  it  involves  and  the  confusion  it  shows— 
Illustration  from  Bedouin  and  from  civilized  society— Natural  laws 
of  distribution  do  not  act  upon  wealth  already  produced,  but  on 
future  production — Reason  of  this — Illustration  of  siphon  and 
analogy  of  blood. 

MILL'S  "  Principles  of  Political  Economy  "  is,  I  think, 
even  at  the  present  day  entitled  to  the  rank  of  the 
best  and  most  systematic  exposition  of  the  scholastically 
accepted  political  economy  yet  written,  and  as  I  wish  to 
present  in  their  very  strongest  form  the  opinions  that  I 
shall  controvert,  I  quote  from  it  the  argument  from  which 
it  is  assumed  that  the  laws  of  distribution  with  which  polit- 
ical economy  has  to  deal  are  human  laws.  Mill  opens 
with  this  argument  the  second  grand  division  of  his  work, 
Book  II.,  entitled  "  Distribution,"  which  follows  his  intro- 
ductory and  the  thirteen  chapters  devoted  to  "Produc- 
tion," and  thus  states  the  fundamental  principle  on  which 
he  endeavors  to  conduct  his  whole  inquiry  into  distribu- 

430 


Chap.  II.         THE  NATURE  OF  DISTRIBUTION.  431 

tion,  the  principle  that  distribution  is  a  matter  of  human 
institution  solely  : 

The  principles  which  have  been  set  forth  in  the  first  part  of  this 
treatise,  are,  in  certain  respects,  strongly  distinguished  from  those, 
on  the  consideration  of  which  we  are  now  about  to  enter.  The  laws 
and  conditions  of  the  production  of  wealth,  partake  of  the  character 
of  physical  truths.  There  is  nothing  optional  or  arbitrary  in  them. 
Whatever  mankind  produce,  must  be  produced  in  the  modes,  and 
under  the  conditions,  imposed  by  the  constitution  of  external  things, 
and  by  the  inherent  properties  of  their  own  bodily  and  mental  struc- 
ture. .  .  . 

But  it  is  not  so  with  the  Distribution  of  Wealth.  That  is  a  matter 
of  human  institution  solely.  The  things  once  there,  mankind,  indi- 
vidually or  collectively  can  do  with  them  as  they  like.  They  can 
place  them  at  the  disposal  of  whomsoever  they  please,  and  on  what- 
ever terms.  Further,  in  the  social  state,  in  every  state  except  total 
solitude,  any  disposal  whatever  of  them  can  only  take  place  by  the 
consent  of  society,  or  rather  of  those  who  dispose  of  its  active  force. 
Even  what  a  person  has  produced  by  his  individual  toil,  unaided  by 
any  one,  he  cannot  keep,  unless  by  the  permission  of  society.  Not 
only  can  society  take  it  from  him,  but  individuals  could  and  would 
take  it  from  him,  if  society  only  remained  passive ;  if  it  did  not  either 
interfere  en  masse,  or  employ  and  pay  people  for  the  purpose  of  pre- 
venting him  from  being  disturbed  in  the  possession.  The  distribution 
of  wealth,  therefore,  depends  on  the  laws  and  customs  of  society. 
The  rules  by  which  it  is  determined,  are  what  the  opinions  and  feel- 
ings of  the  ruling  portion  of  the  community  make  them,  and  are  very 
different  in  different  ages  and  countries ;  and  might  be  still  more 
different,  if  mankind  so  chose. 

The  opinions  and  feelings  of  mankind,  doubtless,  are  not  a  matter 
of  chance.  They  are  consequences  of  the  fundamental  laws  of  human 
nature,  combined  with  the  existing  state  of  knowledge  and  experience, 
and  the  existing  condition  of  social  institutions  and  intellectual  and 
moral  culture.  But  the  laws  of  the  generation  of  human  opinions 
are  not  within  our  present  subject.  They  are  part  of  the  general 
theory  of  human  progress,  a  far  larger  and  more  difficult  subject  of 
inquiry  than  political  economy.  We  have  here  to  consider,  not  the 
causes,  but  the  consequences,  of  the  rules  according  to  which  wealth 
may  be  distributed.  Those,  at  least,  are  as  little  arbitrary,  and  have 
as  much  the  character  of  physical  laws,  as  the  laws  of  production. 
Human  beings  can  control  their  own  acts,  but  not  the  consequences 


432  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

of  their  acts  either  to  themselves  or  to  others.  Society  can  subject 
the  distribution  of  wealth  to  whatever  rules  it  thinks  best ;  but  what 
practical  results  will  flow  from  the  operation  of  those  rules,  must  be 
discovered,  like  any  other  physical  or  mental  truths,  by  observation 
and  reasoning. 

We  proceed,  then,  to  the  consideration  of  the  different  modes  of 
distributing  the  produce  of  land  and  labor  which  have  been  adopted 
in  practice  or  may  be  conceived  in  theory.  * 

In  all  the  dreary  waste  of  economic  treatises  that  I  have 
plodded  through,  this,  by  a  man  I  greatly  esteem,  is  the 
best  attempt  that  I  know  of  to  explain  what  is  really  meant 
in  political  economy  by  laws  of  distribution.  And  it  is  no 
small  evidence  of  Mill's  superiority  to  those  who  since  the 
time  of  Adam  Smith  had  preceded  him,  and  to  those  who 
since  his  own  time  have  followed  him,  in  treatises  which 
bear  the  stamp  of  authority  in  our  schools  and  colleges, 
that  he  should  feel  it  incumbent  on  him  even  to  attempt 
this  explanation.  But  this  attempt  brings  into  clear  relief 
the  unscientific  character  of  what  had  passed  and  yet  still 
passes  as  expositions  of  the  science  of  political  economy. 
In  it  we  are  deliberately  told  that  the  laws  which  it  is  the 
object  of  political  economy  to  discover,  are,  in  the  first 
part  of  its  inquiries,  natural  laws,  but  that  in  the  later  and 
practically  more  important  part  of  those  inquiries,  they 
are  human  laws !  Political  economy  of  this  sort  is  as 
incongruous  as  the  image  that  troubled  Nebuchadnezzar, 
with  its  head  of  fine  gold  and  its  feet  part  of  iron  and  part 
of  clay,  for  in  the  first  part  its  subject-matter  is  natural 
law,  and  in  the  last  and  practically  more  important,  it  is 
human  law. 

Let  us  examine  this  argument  carefully,  for  it  is  made 
on  behalf  of  the  current  political  economy  by  a  man  who 
from  his  twelfth  year  had  been  carefully  trained  in 
systematic  logic  and  who  before  he  wrote  this  had  won 

*  Book  II.,  Chapter  I.,  Sec.  1,  "Principles  of  Political  Economy." 


Cliap.  II.         THE  NATURE  OF  DISTRIBUTION.  433 

the  highest  reputation  as  a  logician,  by  a  great  work  on 
systematic  logic,  that  is  repeated  and  accepted  to  this  day 
by  professors  of  political  economy  in  universities  and 
colleges  that  make  systematic  logic  a  part  of  their  curri- 
culum. 

To  make  this  examination  is  to  see  that  the  plausibility 
of  the  argument  comes  from  the  leading  proposition  —  "The 
things  once  there,  mankind  individually  or  collectively  can 
do  with  them  as  they  like."  It  is  evidently  this  that  in 
the  mind  of  Mill  himself  and  in  the  minds  of  the  professors 
and  students  who  have  since  gone  over  his  "  Principles  of 
Political  Economy,"  has  seemed  to  prove  beyond  perad- 
venture  that  though  the  laws  of  production  may  be  natural 
laws,  the  laws  of  distribution  are  human  laws.  For  in 
itself  this  proposition  is  a  self-evident  truth.  Nothing, 
indeed,  can  be  clearer  than  that  "the  things  once  there, 
mankind  individually  or  collectively  can  do  with  them  as 
they  like  "—that  is  to  say,  wealth  once  produced,  human 
law  may  distribute  it  as  human  will  may  ordain. 

Yet  while  this  proposition  that  things  once  there  mankind 
can  do  with  them  as  they  like,  is  in  itself  irrefutable,  the 
argument  in  which  it  is  introduced  is  an  egregious  instance 
of  the  fallacy  called  by  the  logicians  petitio  principii,  or 
begging  the  question.  The  question  that  Mill  is  arguing 
is  whether  what  is  called  in  political  economy  the  distri- 
bution of  wealth  is  a  matter  of  natural  law  or  a  matter  of 
human  law,  and  what  he  does  is  to  cite  the  fact  that  in 
what  is  called  in  human  law  the  distribution  of  wealth, 
mankind  can  do  as  they  like,  and  assume  from  that  that 
the  distribution  of  wealth  in  the  economic  sense  of  the 
term  is  a  matter  of  human  law— "a  matter  of  human 
institution  solely." 

Such  a  fallacy  could  not  have  been  proposed  by  Mill, 
himself  a  trained  logician,  nor  could  it  have  passed  current 
with  the  trained  logicians  who  since  his  time,  leaving 


434  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

their  logic  behind  them,  have  written  treatises  on  political 
economy,  had  it  not  been  for  the  fact  that  in  the  scholastic 
political  economy  the  real  nature  of  the  distribution  of 
wealth  has  been  slurred  over  and  the  question  of  what 
natural  laws  may  have  to  do  with  it  utterly  ignored.  Let 
us  endeavor  to  settle  this : 

The  original  meaning  of  the  word  distribution  is  that  of 
a  division  into  or  among.  Distribution  is  thus  an  action, 
presupposing  an  exertion  of  will,  and  involving  a  power 
of  giving  that  will  effect.  Now  as  to  things  already  there, 
that  is  to  say  with  wealth  that  has  been  already  produced, 
it  is  perfectly  clear  that  their  division  or  distribution 
among  men  is  determined  entirely  by  human  will  backed 
by  human  force.  With  such  a  distribution  nature  is  not 
concerned  and  in  it  she  takes  no  part.  Things  already 
there,  wealth  already  produced,  belong  to  nature  only  in 
what  logicians  would  call  their  accident,  matter.  But 
while  still  subject  to  material  laws,  such  as  the  law  of 
gravitation,  who  shall  possess  or  enjoy  them  is  a  matter 
purely  of  human  will  and  force.  Mankind  can  place  them 
at  the  disposal  of  whomsoever  they  please  and  on  whatever 
terms. 

Thus,  distribution  in  this  sense,  the  distribution  of  things 
already  in  existence,  is  indeed  a  matter  solely  of  human 
will  and  power.  If  I  would  know  the  law  of  distribution 
in  this  sense  of  human  law,  I  cannot  look  to  political 
economy,  but  where  settled  institutions  have  not  grown 
up  or  are  discarded,  must  look  to  the  will  of  the  strongest. 
Where  in  civilized  society  it  is  human  institutions  that 
decide  among  whom  wealth  shall  be  divided,  as  for 
instance  in  case  of  an  insolvent,  in  case  of  the  estate  of 
a  deceased  person,  or  in  case  of  controverted  ownership, 
the  municipal  law  governing  such  distribution  is  to  be 
found  recorded  in  written  or  printed  statutes,  in  the 
decisions  of  judges  or  in  traditions  of  common  use  and 


Chap.  II.         THE  NATURE  OF  DISTRIBUTION.  435 

wont.  It  is  in  cases  of  dispute  authoritatively  expounded 
by  courts,  and  is  carried  into  effect  by  sheriffs  or  constables 
or  other  officials  having  at  their  back  the  coercive  power 
of  the  state,  with  its  sanctions  of  seizure  of  property  and 
person,  fine,  imprisonment  and  death. 

But  from  its  very  rudest  expression,  where  what  obtains 

is 

"  The  good  old  rule, 

the  simple  plan, 

That  they  should  take  who  have  the  power, 
And  they  should  keep  who  can," 

to  societies  where  the  most  elaborate  machinery  for  declar- 
ing and  enforcing  human  laws  of  distribution  exists,  such 
laws  of  distribution  always  are  and  always  must  be  based 
upon  human  will  and  human  force. 

How  then  can  we  talk  of  natural  laws  of  distribution  ? 
Laws  of  nature  are  not  written  or  printed,  or  carved  on 
pillars  of  stone  or  brass.  They  have  no  parliaments,  or 
legislatures,  or  congresses  to  enact  them,  no  judges  to 
declare  them,  no  constables  to  enforce  them.  What  then 
can  we  really  mean  by  natural  laws  of  the  distribution  of 
wealth  ?  What  is  the  mode  or  method  by  which  without 
human  agency  wealth  may  be  said  to  be  distributed  by 
natural  law,  and  without  human  agency,  among  individuals 
or  classes  of  individuals  ?  Here  is  the  difficulty  that  not 
having  been  cleared  up  in  economic  works  has  given 
plausibility  to  the  assumption  into  which  the  scholastic 
economy  has  fallen  in  assuming  that  the  only  laws  of 
distribution  with  which  political  economy  can  deal  are  not 
natural  laws  at  all,  but  only  human  laws— an  assumption 
that  must  bring  any  science  of  political  economy  to  an  end 
with  production. 

Laws  of  nature,  as  was  explained  in  the  first  part  of  this 
work  (Book  I.,  Chapter  VIII.),  are  the  names  which  we 
give  to  the  invariable  uniformities  of  coexistence  and 


436  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

sequence  which  we  find  in  external  things,  and  which  we 
call  laws  of  nature  because  our  reason  apprehends  in  them 
the  evidence  of  an  originating  will,  preceding  and  superior 
to  human  will.  Let  us  call  in  the  aid  of  that  most  potent 
instrument  of  political  economy,  imaginative  experiment, 
to  see  if  we  do  not  find  evidences  of  such  laws  of  nature, 
the  only  laws  with  which  a  true  science  of  political  economy 
can  deal,  in  the  matter  of  the  distribution  of  wealth : 

A  shifting  of  desert  sands  reveals  to  a  roving  tribe 
wealth  produced  in  a  long  dead  civilization— rings,  coins, 
bracelets,  precious  stones  and  delicately  carved  marbles. 
The  things  are  there.  They  have  been  produced.  The 
tribesmen  individually  or  collectively  can  do  with  them  as 
they  like— can  place  them  at  the  disposal  of  whomsoever 
they  please,  and  on  whatever  terms.  Nature  will  not 
interfere.  The  desert  sand  and  desert  sky,  the  winds  that 
sweep  across  it,  the  sun  and  moon  and  stars  that  look 
down  on  it,  the  living  things  that  prowl  or  crawl  over  it, 
will  make  no  remonstrance  whatever  the  tribesmen  may 
choose  to  do  with  this  wealth  that  is  there— that  has 
already  centuries  ago  been  produced. 

But  things  freshly  produced  this  day  or  this  minute  are 
as  truly  here  as  things  produced  centuries  ago.  Why 
should  not  mankind  individually  or  collectively  do  with 
them  also  as  they  like;  place  them  at  the  disposal  of 
whomsoever  they  please  and  on  whatever  terms  they 
choose?  They  could  do  so  with  no  more  remonstrance 
from  the  things  themselves  or  from  external  nature  than 
would  attend  the  rifling  of  Egyptian  tombs  by  Bedouins. 
Why  should  not  civilized  men  rifle  the  products  of  farm  or 
mine  or  mill  as  soon  as  they  appear  ?  Human  law  inter- 
poses no  objection  to  such  collective  action,  for  human 
law  is  but  an  expression  of  collective  human  will,  and 
changes  or  ceases  with  the  changes  in  that  will.  Natural 
law,  so  far  as  it  is  comprehended  in  what  we  call  physical 


Chap.  II.         THE  NATURE  OF  DISTRIBUTION.  437 

law,  interposes  no  objection— the  laws  of  matter  and  energy 
in  all  their  forms  and  combinations  pay  no  heed  whatever 
to  human  ownership. 

Yet  it  needs  no  economist  to  tell  us  that  if  in  any  country 
the  products  of  a  living  civilization  were  treated  as  the 
Bedouins  treat  the  products  of  a  dead  civilization,  the 
swift  result  would  be  fatal  to  that  civilization— would  be 
poverty,  famine  and  death  to  the  people  individually  and 
collectively.     This  result  would  come  utterly  irrespective  [ 
of  human  law.     It  would  make  no  difference  whether  the  I 
appropriation  of  "  things  once  there "  without  regard  to  | 
'  the  will  of  the  producer  were  in  defiance  of  human  law  or 
\  under  the  sanctions  of  human  law ;  the  result  would  be 
the  same.     The  moment  producers  saw  that  what  they  / 
produced  might  be  taken  from  them  without  their  consent,  \ 
production  would  cease  and  starvation  begin.     Clearly 
then,  this  inevitable  result  is  not  a  consequence  of  human 
law,  but  a  consequence  of  natural  law.    Not  a  consequence 
of  the  natural  laws  of  matter  and  motion,  but  a  consequence 
i  of  natural  laws  of  a  different  kind— laws  no  less  immutable 
'  than  the  natural  laws  of  matter  and  motion. 

For  natural  law  is  not  all  comprehended  in  what  we  call 
physical  law.  Besides  the  laws  of  nature  which  relate  to 
matter  and  energy,  there  are  also  laws  of  nature  that  relate 
to  spirit,  to  thought  and  will.  And  should  we  treat  the 
present  products  of  farm  or  mine  or  mill  or  factory  as  we 
may  treat  the  products  of  a  dead  civilization,  we  shall  feel 
the  remonstrance  of  an  immutable  law  of  nature  wherever 
we  come  in  conflict  with  the  moral  law.  This  is  not  to  say 
that  any  division  of  wealth  that  mankind  individually  or 
collectively  may  choose  to  make  will  be  interfered  with  or 
prevented.  Things  once  here,  once  in  existence  in  the 
present,  are  absolutely  in  the  control  of  the  men  of  the 
present,  and  "they  can  place  them  at  the  disposal  of 
whomsoever  they  please  and  on  whatever  terms."  Any 


438  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

remonstrance  of  the  moral  law  of  nature  to  their  action 
will  not  show  itself  in,  or  in  relation  to,  these  identical 
things.  But  it  will  show  itself  in  the  future— in  checking 
or  preventing  the  production  of  such  things.  Things  once 
produced  are  then  and  there  already  in  existence,  and  may 
be  distributed  as  mankind  may  will.  But  the  things  on 
which  the  natural  laws  of  distribution  exert  their  control 
are  not  things  already  produced,  but  things  which  are 
being,  or  are  yet  to  be,  produced. 

In  other  words,  production  in  political  economy  is  not 
to  be  conceived  of  as  something  which  goes  on  for  a  while 
and  then  stops,  when  its  product  wealth  has  been  brought 
into  being ;  nor  is  it  to  be  conceived  of  as  something  related 
only  to  a  production  that  is  finished  and  done.  Both 
production  and  distribution  are  properly  conceived  of  as 
continuous,  resembling  not  the  drawing  of  water  in  a 
bucket  but  the  drawing  of  water  through  a  pipe— or  better 
still,  in  the  conveyance  of  water  over  an  elevation  by 
means  of  a  bent  pipe  or  siphon,  of  which  the  shorter  arm 
may  stand  for  production  and  the  longer  for  distribution. 
It  is  in  our  power  to  tap  this  longer  arm  of  the  pipe  at 
any  point  below  the  highest,  and  take  what  water  is  already 
there.  But  the  moment  we  do  so,  the  continuity  of  the 
stream  is  at  an  end,  and  the  water  will  cease  to  flow. 

Production  and  distribution  are  in  fact  not  separate 
things,  but  two  mentally  distinguishable  parts  of  one 
thing— the  exertion  of  human  labor  in  the  satisfaction  of 
human  desire.  Though  materially  distinguishable,  they  are 
as  closely  related  as  the  two  arms  of  the  siphon.  And  as  it 
is  the  outflow  of  water  at  the  longer  end  of  the  siphon  that  is 
the  cause  of  the  inflow  of  water  at  the  shorter  end,  so  it  is 
that  distribution  is  really  the  cause  of  production,  not 
production  the  cause  of  distribution.  In  the  ordinary 
course,  things  are  not  distributed  because  they  have  been 
produced,  but  are  produced  in  order  that  they  may  be 


Chap.  U.         THE  NATURE   OF   DISTRIBUTION.  439 

distributed.  Thus  interference  with  the  distribution  of 
wealth  is  interference  with  the  production  of  wealth,  and 
shows  its  effect  in  lessened  production. 

To  use  again  the  analogy  supplied  by  our  material 
frames.  Blood  stands  in  the  same  relation  to  the  physical 
body  that  wealth  does  to  the  social  body,  distributing 
throughout  all  parts  of  the  physical  frame  potentialities 
akin  to  those  which  wealth  carries  through  the  social 
frame.  But  though  the  organs  that  distribute  this  vital 
current  are  different  from  the  organs  that  produce  it,  their 
relations  are  so  intimate  that  seriously  to  interfere  with 
the  distribution  of  the  blood  is  necessarily  to  interfere 
with  its  production.  Should  we  say  of  the  blood  that 
passes  into  the  great  pumping  station,  the  heart,  "It  has 
been  produced ;  it  is  here,  and  we  may  do  with  it  as  we 
please !  "  and  acting  on  the  word,  divert  it  from  its  course 
through  the  organs  of  distribution— at  once  the  great 
pump  ceases  to  beat  and  the  organs  that  produce  blood 
lose  their  power  and  begin  to  decompose. 

And  as  to  pierce  the  heart  and  divert  the  blood  that  has 
been  produced  from  the  natural  course  of  its  distribution 
is  to  bring  about  the  death  of  the  physical  organism  most 
swiftly  and  certainly,  so  to  interfere  with  the  natural  laws 
of  the  distribution  of  wealth  is  to  bring  about  a  like  death 
of  the  social  organism.  If  we  seek  for  the  reason  of  ruined 
cities  and  dead  civilizations  we  shall  find  it  in  this. 


CHAPTER  III. 

THE    COMMON    PERCEPTION    OF   NATURAL 
LAW    IN    DISTRIBUTION. 

SHOWING  THE  COMMON  AND  INERADICABLE  PERCEPTION   OF 
NATURAL  LAWS  OF  DISTRIBUTION. 

Mill's  admission  of  natural  law  in  his  argument  that  distribution 
is  a  matter  of  human  law — Sequence  and  consequence — Human 
will  and  the  will  manifest  in  nature— Inflexibility  of  natural  laws 
of  distribution— Human  will  powerless  to  affect  distribution— 
This  shown  by  attempts  to  affect  distribution  through  restriction 
of  production— Mill's  confusion  and  his  high  character. 

IT  would  seem  impossible  for  a  man  of  the  logical 
acumen  and  training  of  John  Stuart  Mill  to  accept 
in  deference  to  preconceived  opinion,  and  to  justify  by  such 
a  transparent  fallacy,  such  an  incongruous  conclusion 
as  that  while  the  laws  of  political  economy  relating  to 
production  are  natural  laws,  the  laws  relating  to  distribu- 
tion are  human  laws,  without  at  least  a  glance  towards  the 
truth.  And  such  a  sidelong  glance  we  find  in  the  latter 
part  of  the  argument  which  in  the  last  chapter  was  given 
in  full. 

To  bring  this  more  clearly  into  view  let  me  print  it 
again,  supplying  the  elisions  in  brackets,  and  emphasizing 
with  italics  words  to  which  I  would  direct  special  attention  : 

We  have  here  [in  political  economy]  to  consider,  not  the  causes, 
but  the  consequences,  of  the  [human]  rules  according  to  which  wealth 

440 


Chap.  III.        NATURAL  LAW  IN  DISTRIBUTION. 

may  be  distributed.  Those  [consequences'],  at  least,  are  as  little 
arbitrary,  and  have  as  much  the  character  of  physical  laws,  as  the 
laws  of  production.  Human  beings  can  control  their  own  acts,  but 
not  the  consequences  of  their  acts  either  to  themselves  or  to  others. 
Society  can  subject  the  distribution  of  wealth  to  whatever  rules  it 
thinks  best ;  but  what  practical  results  will  flow  from  the  operation  of 
those  rules,  must  be  discovered,  like  any  other  physical  or  mental 
truths,  by  observation  and  reasoning. 

Here  we  have,  what  would  hardly  be  expected  from  the 
author  of  "  Mill's  System  of  Logic,"  an  example  of  that 
improper  use  of  the  word  consequence  where  sequence  is 
really  meant,  which  I  referred  to  in  Chapter  VIII.  of 
Book  I. 

To  recall  what  was  there  said :  A  sequence  is  that  which 
follows.  To  say  that  one  thing  is  a  sequence  of  another 
is  to  say  that  it  has  to  its  antecedent  a  relation  of  succession 
or  coming  after,  but  is  not  necessarily  to  say  that  this 
relation  is  invariable  or  causal.  But  a  consequence  is  that 
which  follows/row.  To  say  that  one  thing  is  a  consequence 
of  another  is  really  to  say  that  it  has  to  its  antecedent  not 
merely  a  relation  of  succession,  but  of  invariable  succes- 
sion—the relation  namely  of  effect  to  cause. 

Our  disposition  to  prefer  the  stronger  word  leads  in 
common  speech  to  the  frequent  use  of  consequence  where 
merely  sequence  is  really  meant,  or  to  speak  of  a  result  as 
the  consequence  of  what  we  know  can  be  only  one  of  the 
causal  elements  in  bringing  it  about.  If  a  boy  break  a 
window-pane  in  throwing  a  stone  at  a  cat,  or  a  man  is 
drowned  in  going  in  to  swim,  we  are  apt  to  speak  of  the 
one  thing  as  a  consequence  of  the  other,  though  we  know 
that  stones  are  constantly  thrown  at  cats  without  break- 
ing windows  and  that  men  go  in  to  swim  without  being 
drowned,  and  that  the  result  in  the  particular  case  was  not 
due  to  the  human  action  alone,  but  to  the  concurrence  with 
it  of  other  causes,  such  as  the  force  and  direction  of  wind 
or  tide,  the  attraction  of  gravitation,  etc.  This  tendency 


442  THE  DISTRIBUTION  OF  WEALTH.         Book  IF. 

to  a  loose  use  of  the  word  consequence  is  of  little  or  no 
moment  in  common  speech,  where  what  is  really  meant  is 
well  understood ;  but  it  becomes  a  fatal  source  of  confusion 
in  philosophical  writing,  where  exactness  is  necessary,  not 
merely  that  the  writer  be  understood  by  the  reader,  but 
that  he  may  really  understand  himself. 

Now,  what  are  the  things  which  Mill  here  speaks  of  as 
consequences  of  human  rules  according  to  which  wealth 
may  be  distributed :  the  things  which  (and  not  the  causes 
of  the  human  rules)  we  have,  he  says,  to  consider  in 
political  economy,  and  which  he  tells  us  have  as  much  the 
character  of  physical  laws  as  the  laws  of  production,  and 
"must  be  discovered,  like  any  other  physical  or  mental 
truths,  by  observation  and  reasoning  "  ?  They  follow,  and 
are  thus  sequences  of  human  action,  or  as  Mill  subsequently 
speaks  of  them,  "  practical  results,"  appearing  as  invariable 
uniformities  in  the  actual  outcome  of  man's  efforts  to 
regulate  the  distribution  of  wealth.  But  though  sequences 
they  clearly  are  not  con-sequences  of  human  action.  To 
say  that  human  beings  can  control  their  own  acts  but  not 
what  follows  from  those  acts  would  be  to  deny  the  laws  of 
causation.  Since  these  invariable  uniformities  appearing 
in  the  practical  results  or  sequences  of  man's  action  cannot 
be  related  as  effects  to  man's  action  as  cause,  they  are  not 
properly  con-sequences  of  man's  action,  but  con-sequences 
of  something  independent  of  man's  action. 

The  truth  that  Mill  vaguely  perceives  and  confusedly 
states  in  these  sentences  is  in  direct  contradiction  of  his 
assertion  that  the  distribution  of  wealth  is  a  matter  of 
human  institution  solely.  It  is,  that  the  distribution  of 
wealth  is  not  a  matter  of  human  institution  solely,  and 
does  not  depend  upon  the  laws  and  customs  of  society 
alone ;  that  though  human  beings  may  control  their  own 
acts  towards  the  distribution  of  wealth,  and  frame  for 
their  action  such  laws  as  the  ruling  portion  of  the 


Chap.  III.        NATURAL  LAW  IN  DISTRIBUTION.  443 

community  may  wish,  yet  the  practical  results  will  not 
depend  on  this  human  action  alone,  but  on  that  as 
combined  with  and  dominated  by  another  more  permanent 
and  powerful  element— a  something  independent  of  human 
action  that  modifies  the  practical  results  of  human  action 
towards  the  distribution  of  wealth,  as  gravitation  modifies 
the  flight  of  a  cannon  ball. 

Now  these  invariable  sequences  which  come  out  in  the 
practical  results  of  man's  action,  and  which  we  know  only 
as  effects,  and  cannot  relate  to  man's  action  as  cause,  we 
are  compelled  by  the  mental  necessity  which  demands  a 
cause  for  every  effect  to  refer  to  a  causal  antecedent  in 
the  nature  of  things,  which,  as  explained  in  Book  I.,  we 
call  a  law  of  nature.  That  is  to  say,  invariable  uniformities, 
modifying  the  effects  of  all  human  action,  such  as  Mill 
confusedly  recognizes  in  these  sentences,  are  precisely 
what,  apprehending  them  as  manifestations  of  a  higher 
than  human  will,  we  style  laws  of  nature,  or  natural  laws. 

Mill's  own  definition  of  a  law  of  nature  ("System  of 
Logic,"  Book  III.,  Chapter  IV.)  is  a  uniformity  in  the 
course  of  nature,  ascertained  by  what  is  regarded  as  a 
sufficient  induction,  and  reduced  to  its  most  simple 
expression.  Thus  if  observation  and  reasoning  discover 
in  the  actual  phenomena  or  practical  results  of  man's 
action  in  the  distribution  of  wealth  uniformities  which 
swerve  or  destroy  the  effect  of  human  action  not  in  exact 
conformity  with  them,  these  are  the  natural  laws  of 
distribution  as  clearly  as  similar  sequences  or  uniformities 
which  observation  and  reasoning  discover  in  the  phe- 
nomena of  production  are  the  natural  laws  of  production. 
And  what  Mill  is  vaguely  thinking  of  and  confusedly 
writing  about  are  clearly  the  very  natural  laws  of  distri- 
bution which  he  says  do  not  exist. 

In  truth,  the  distribution  of  wealth  is  no  more  "  a  matter 
of  human  institution  solely"  than  is  the  production  of 


444  THE  DISTRIBUTION  OF  WEALTH.         Hook  IT. 

wealth.  That  human  beings  can  control  their  own  acts  is 
true  in  one  case  as  in  the  other,  only  in  the  same  sense 
and  to  the  same  degree.  Our  will  is  free.  But  human 
will  can  only  affect  external  nature  by  taking  advantage 
of  natural  laws,  which  in  the  very  name  we  give  them 
carry  the  implication  of  a  higher  and  more  constant  will. 
A  boy  may  throw  a  stone  or  an  artilleryman  fire  a  cannon 
ball  at  the  moon.  If  the  result  depended  solely  on  the 
human  action,  both  ball  and  stone  would  reach  the  moon. 
But  the  governance  of  natural  law— without  conformity 
to  which  even  such  action  as  throwing  a  stone  or  firing 
a  cannon  ball  cannot  take  place— continuing  to  modify 
results,  brings  both  to  the  ground  again,  the  one  in  a  few 
feet  and  the  other  in  a  few  thousand  feet. 

And  the  natural  laws  which  political  economy  discovers, 
whether  we  call  them  laws  of  production  or  laws  of 
distribution,  have  the  same  proof,  the  same  sanction  and 
the  same  constancy  as  the  physical  laws.  Human  laws 
change,  but  the  natural  laws  remain,  the  same  yesterday, 
to-day  and  to-morrow,  world  without  end ;  manifestations 
to  us  of  a  will  that  though  we  cannot  obtain  direct  know- 
ledge of  it  through  the  senses,we  can  yet  see  never  slumbers 
nor  sleeps  and  knows  not  change  in  jot  or  tittle. 

If  I  can  prove  that  this  inflexibility  to  human  effort  is 
characteristic  of  the  laws  of  distribution  that  political 
economy  seeks  to  discover,  I  have  proved  finally  and 
conclusively  that  the  laws  of  distribution  are  not  human 
laws,  but  natural  laws.  To  do  this  it  is  only  necessary 
to  appeal  to  facts  of  common  knowledge. 

Now  the  three  great  laws  of  distribution,  as  recognized 
by  all  economists,  though  they  are  sometimes  placed  in 
different  order,  are  the  law  of  wages,  the  law  of  interest 
and  the  law  of  rent.  Into  these  three  elements  or  factors, 
the  entire  result  of  production  is  by  natural  law  distributed. 
Now  I  do  not  of  course  mean  to  say  that  human  law  may 


Chap.  III.        NATURAL  LAW  IN  DISTRIBUTION.  445 

not  take  from  the  part  which  under  the  natural  law  of 
distribution  might  be  enjoyed  by  one  man  or  set  of  men 
and  give  it  to  another,  for  as  I  have  already  said  all 
wealth  or  any  wealth  from  the  moment  it  is  produced  is 
entirely  at  the  disposition  of  human  law,  and  mankind 
can  do  with  it  as  they  please.  What  I  mean  to  say  is  that 
human  law  is  utterly  powerless  directly  to  alter  distribu- 
tion, so  that  the  laborer  as  laborer  will  get  more  wages  or 
less  wages,  the  capitalist  as  capitalist  more  interest  or  less 
interest,  or  the  landowner  as  landowner  more  rent  or  less 
rent,  or  in  any  way  alter  the  conditions  of  distribution 
fixed  by  natural  law  under  existing  industrial  conditions. 
This  has  been  tried  again  and  again  by  the  strongest 
governments,  and  is  to  some  extent  still  being  tried,  but 
always  unavailingly. 

In  England,  as  in  other  countries,  there  have  been  at 
various  times  attempts  to  regulate  wages  by  law,  sometimes 
to  decrease  them  and  sometimes  to  increase  them  below 
or  above  the  level  fixed  at  the  time  by  natural  law.  But 
it  was  found  that  in  the  one  case  no  law  could  prevent  the 
laborer  from  asking  and  the  employer  from  paying  more 
than  this  legal  rate  when  the  natural  law,  or  as  we  usually 
say  the  equation  of  demand  and  supply,  made  wages  higher, 
and  that  no  law,  even  when  backed  by  grants  in  aid  of 
wages,  as  was  done  in  England  during  the  beginning  of 
this  century,  could  in  the  opposite  case  keep  wages  at  a 
higher  rate.  So  it  has  proved  with  interest.  There  have 
been  numberless  attempts  to  keep  down  interest,  and  the 
State  of  New  York  retains  to  this  day  on  her  statute-book 
a  law  limiting,  though  with  considerable  holes,  the  rate  of 
interest  to  six  per  cent.  But  such  laws  never  have  suc- 
ceeded and  do  not  now  succeed  in  keeping  interest  below 
the  natural  rate.  Lenders  receive  and  borrowers  pay  that 
rate  in  the  form  of  sales,  premiums,  discounts  and  bonuses, 
where  the  law  forbids  them  to  do  it  openly.  So,  too,  in 


446  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

the  case  of  rent.  The  British  Parliament  has  recently  at- 
tempted to  reduce  agricultural  rent  in  certain  cases  in  Ire- 
land by  instituting  officials  with  power  to  fix  "  fair  rents  "— 
what  should  be  paid  by  the  tenant  to  the  landlord.  They 
have  in  many  cases  cut  down  the  income  of  certain  of  the 
landlords,  but  they  have  not  lessened  rent.  They  have 
merely  divided  what  before  went  to  the  landlord  between 
him  and  the  existing  tenant,  and  a  new  tenant  must  pay, 
part  in  rent  to  the  landlord  and  part  in  tenant  right  to  the 
existing  tenant,  as  much  for  the  use  of  the  land  as  it  would 
have  commanded  if  this  attempt  to  reduce  rent  had  not 
been  made. 

And  so  it  has  been  with  attempts  of  human  law  to  fix 
and  regulate  prices,  which  involve  the  same  great  laws  of 
distribution  in  combined  forms.  Human  law  is  always 
potent  to  do  as  mankind  will  with  what  has  been  produced, 
but  it  cannot  directly  affect  distribution.  That  it  can 
reach  only  through  production. 

Nothing  indeed  could  be  more  inconsistent  with  common 
perceptions  than  this  notion  into  which  the  scholastic 
economists  have  fallen,  that  the  distribution  of  wealth  is 
less  a  matter  of  natural  law  than  the  production  of  wealth. 
The  fact  is  (the  reason  of  the  fact  will  be  considered 
hereafter)  that  the  common  perceptions  of  men  recognize 
the  immutability  of  the  natural  laws  of  distribution  more 
quickly  and  more  certainly  than  of  the  natural  laws  of 
production.  If  we  look  over  the  legislation  by  which  the 
ruling  portion  of  our  communities  have  striven  to  affect 
the  distribution  of  wealth,  we  shall  find  that  (as  if  conscious 
of  its  hopelessness)  they  have  seldom  if  ever  tried  directly 
to  affect  the  distribution  of  wealth ;  but  have  tried  to  affect 
distribution  indirectly  through  production. 

An  English  Elizabeth  or  James  wishes  to  alter  the 
practical  outcome  of  the  distribution  of  wealth  in  favor 
of  an  Essex  or  Villiers,  and  to  accomplish  this  imposes 


Chap.  IIL        NATURAL  LAW  IN  DISTRIBUTION.  447 

restrictions  upon  the  production  of  gold  lace  or  playing 
cards.  A  Russian  Czar  desires  to  alter  the  distribution  of 
wealth  in  favor  of  one  of  his  boyars,  and  seeks  that  end 
by  making  a  tract  of  land  the  property  of  his  favorite  and 
forbidding  peasants  to  leave  it,  thus  preventing  them  from 
engaging  in  production  except  on  his  terms.  Or,  to  come 
nearer  the  present  in  time  and  place,  a  Carnegie  or  a 
Wharton  wishes  to  alter  distribution  in  his  favor  so  largely 
that  he  may  play  at  building  libraries  and  endowing 
schools  of  political  economy  ( ?) ;  he  seeks  his  end  by  getting 
Congress  to  restrict  the  production  of  iron,  steel  or  nickel, 
by  imposing  a  duty  upon  importation. 

But  it  is  not  alone  in  the  sentences  I  have  reprinted 
that  Mill  shows  an  undefined  consciousness  that  the  laws 
of  the  distribution  of  wealth  which  it  is  the  proper  business 
of  political  economy  to  discover  are  natural  laws,  not 
human  laws.  Though  he  does  not  retract  his  statement 
that  "  the  distribution  of  wealth  depends  on  the  laws  and 
customs  of  society/7  and  formally  proceeds  "to  the  con- 
sideration of  the  different  modes  of  distributing  the  produce 
of  land  and  labor  which  have  been  adopted  in  practice  or 
may  be  conceived  in  theory,"  yet  we  find  him  afterwards 
(Book  II.,  Chapter  III.,  Sec.  1)  speaking  of  laws  according 
to  which  "  the  produce  distributes  itself  by  the  spontaneous 
action  of  the  interests  of  those  concerned."  If  there  be 
laws  according  to  which  produce  distributes  itself,  they 
certainly  cannot  be  human  laws.  King  Canute,  we  are 
told,  once  tried  by  edict  to  turn  back  the  tide ;  but  who 
has  ever  dreamed  that  produce,  whether  houses  or  metals 
or  wheat  or  hay,  or  even  pigs  or  sheep,  could  by  ukase  or 
irade,  act  of  Parliament  or  resolution  of  Congress,  be  made 
to  distribute  itself? 

The  truth  is  that  in  the  long  discussion  of  the  distribution 
of  wealth,  which  in  John  Stuart  Mill's  "Principles  of 
Political  Economy "  succeeds  to  what  I  have  quoted,  he 


448  THE  DISTRIBUTION   OF   WEALTH.          Book  IF. 

neither  follows  what  he  formally  states,  that  distribution 
is  a  matter  of  human  institution  solely,  and  depends  on 
the  laws  and  customs  of  society  j  nor  yet  does  he  follow 
what  he  confusedly  admits,  that  it  is  a  matter  of  natural 
law.  Passing  to  a  consideration  of  the  origin  of  private 
property  in  human  law,  and  beginning  with  Communism 
and  Socialism,  the  Moravians,  the  Eappists,  the  followers 
of  Louis  Blanc  and  Cabet,  St.  Simonism  and  Fourierism, 
he  rambles  along,  mixing  what  properly  belongs  to  the  sci- 
ence of  political  economy  with  discussions  of  competition 
and  custom,  slavery,  peasant  proprietors,  metayers,  cot- 
tiers, the  means  of  abolishing  cottier  tenancy  and  popular 
remedies  for  low  wages,  without  either  clearly  giving  the 
laws  of  distribution  or  saying  what  they  are.  And  the 
reader  who  wishes  to  discover  what  the  ablest  and  most 
systematic  of  scholastic  economists  takes  to  be  the  laws  of 
distribution  of  wealth  must  after  going  through  this  mass 
of  dissertation  keep  on  through  some  forty  chapters  or 
600  pages  more,  and  finally  fish  them  out  for  himself— 
only  to  find  when  he  gets  them  or  thinks  that  he  gets 
them,  that  they  do  not  correlate  with  each  other. 

As  I  have  said,  I  only  speak  of  John  Stuart  Mill  as  the 
best  example  of  what  has  passed  as  the  scientific  exposi- 
tion of  political  economy.  The  same  absence  of  a  really 
scientific  method— that  is  to  say  the  same  want  of  order 
and  precision— will  be  found  in  the  treatment  of  distribu- 
tion in  all  the  treatises  of  the  school  of  economists,  now 
called  the  Classical  school,  of  which  Mill  may  be  deemed 
the  culmination.  And  it  is  to  be  found  in  even  worse 
degree  in  the  so-called  Historical  and  Austrian  schools 
which  have  within  recent  years  succeeded  the  school  of 
Mill  in  all  our  great  universities.  They  are  indeed  so  far 
behind  the  predecessors  at  whom  they  affect  to  sneer,  that 
they  make  no  attempt  even  at  order  and  precision.  Who- 


Chap.  III.        NATURAL  LAW  IN  DISTRIBUTION.  449 

ever  would  have  an  economic  contrast  suggested  to  him 
like  that  of  Hamlet's  "  Hyperion  to  a  Satyr,"  let  him 
compare  John  Stuart  Mill's  "  Principles  of  Political 
Economy"  with  the  most  pretentious  of  recent  "Prin- 
ciples of  Economics." 


CHAPTER  IV. 

THE  REAL  DIFFERENCE   BETWEEN   LAWS  OF 
PRODUCTION  AND  OF  DISTRIBUTION. 

SHOWING  THAT  DISTRIBUTION  HAS   REFERENCE   TO   ETHICS, 
WHILE  PRODUCTION  HAS  NOT. 

The  laws  of  production  are  physical  laws ;  the  laws  of  distribution 
moral  laws,  concerned  only  with  spirit— This  the  reason  why  the 
immutable  character  of  the  laws  of  distribution  is  more  quickly 
and  clearly  recognized. 

MILL  is  clearly  wrong  in  the  distinction  which  he  seeks 
to  draw  between  the  production  of  wealth  and  the 
distribution  of  wealth  with  regard  to  the  kind  of  laws 
which  it  is  the  proper  business  of  these  departments  of 
political  economy  to  discover. 

But  there  is  an  important  difference  between  them 
which,  although  he  has  failed  to  distinguish  it,  probably 
lies  in  vague  way  at  the  bottom  of  the  notion  that  the  laws 
of  production  and  the  laws  of  distribution  are  different 
kinds  of  laws.  It  is,  that  the  branch  of  the  science  which 
treats  of  the  distribution  of  wealth  is  that  in  which  the 
relations  of  political  economy  to  ethics  are  clearer  and 
closer  than  in  that  branch  which  treats  of  production. 

In  short,  the  distinction  between  the  laws  of  production 
and  the  laws  of  distribution  is  not,  as  is  erroneously  taught 
in  the  scholastic  political  economy,  that  the  one  set  of  laws 

450 


Chap.  IV.        PHYSICAL  LAWS  AND  MORAL  LAWS.         451 

are  natural  laws,  and  the  other  human  laws.  Both  sets 
of  laws  are  laws  of  nature.  The  real  distinction  is  pointed 
out  in  the  last  chapter,  that  the  natural  laws  of  production 
are  physical  laws  and  the  natural  laws  of  distribution  are 
moral  laws.  And  it  is  this  that  enables  us  to  see  in 
political  economy  more  clearly  than  in  any  other  science, 
that  the  government  of  the  universe  is  a  moral  government, 
having  its  foundation  in  justice.  Or,  to  put  this  idea  into 
terms  that  fit  it  for  the  simplest  comprehension,  that  the 
Lord  our  God  is  a  just  God. 

In  considering  the  production  of  wealth  we  are  con- 
cerned with  natural  laws  of  which  we  can  only  ask  what 
is,  without  venturing  to  raise  the  question  of  what  ought 
to  be.  Even  if  we  can  imagine  a  world  in  which  beings 
like  ourselves  could  maintain  an  existence  and  satisfy 
their  material  desires  in  any  other  way  than  by  the 
application  of  labor  to  land  under  relations  of  uniform 
sequence  not  substantially  different  from  those  invariable 
sequences  of  matter  and  motion  and  life  and  being  which 
we  denominate  physical  laws,  we  cannot  venture  to  apply 
to  these  physical  laws,  of  which  we  can  primarily  say  only 
that  they  exist,  any  idea  of  ought.  Even  in  matters  as  to 
which  we  can  imagine  considerable  differences  between 
the  physical  uniformities  that  we  observe  in  this  world 
and  those  that  might  exist  in  a  world  in  other  respects 
resembling  this— such  for  instance  as  might  be  brought 
about  by  a  change  in  the  distance  of  our  earth  from  the 
sun,  or  in  the  inclination  of  its  axis  to  the  ecliptic,  or  in 
the  density  of  its  atmospheric  envelop;  or  even  by  a 
change  in  such  uniformities  as  seem  to  us  to  involve 
exceptions  to  a  more  general  uniformity,  like  that  exception 
to  the  general  law  of  the  contraction  of  water  in  cooling 
which  causes  it  at  the  freezing-point  to  expand — there  is 
nothing  that  has  any  reference  to  right  or  justice,  or  that 
arouses  in  us  any  perception  of  ought  or  duty. 


452  THE  DISTRIBUTION  OF  WEALTH.         Book  1 V. 

For  the  perception  of  right  or  justice,  the  recognition 
of  ought  or  duty,  has  no  connection  with  or  relation  to  two 
of  the  three  elements  or  categories  into  which  we  may  by 
analysis  resolve  the  world  as  it  is  presented  in  conscious- 
ness to  our  reasoning  faculties.  That  is  to  say,  right  or 
justice,  ought  or  duty,  do  not  and  cannot  have  any  relation 
either  to  matter  or  to  energy,  but  only  to  spirit.  They 
presuppose  conscious  will,  and  cannot  be  extended  beyond 
the  limits  in  which  we  recognize  or  assume  a  will  having 
freedom  to  act. 

Thus  is  it  that  in  considering  the  nature  of  wealth  or 
the  production  of  wealth  we  come  into  no  direct  and 
necessary  contact  with  the  ethical  idea,  the  idea  of  right 
or  j  ustice.  It  is  only  when  and  as  we  endeavor  to  pierce 
behind  the  invariable  uniformities  of  matter  and  motion 
to  which  we  give  the  name  of  laws  of  nature  and  recognize 
them  in  our  thought  as  manifestations  of  an  originating 
or  creative  spirit,  for  which  our  common  name  is  God,  in 
its  dealing  with  other,  and  though  inferior,  essentially 
spiritual  beings,  that  the  idea  of  right  or  justice  can  have 
any  place  in  that  branch  of  political  economy  which  deals 
with  the  na,ture  of  wealth  or  the  laws  of  its  production. 

But  the  moment  we  turn  from  a  consideration  of  the 
laws  of  the  production  of  wealth  to  a  consideration  of  the 
laws  of  the  distribution  of  wealth  the  idea  of  ought  or 
duty  becomes  primary.  All  consideration  of  distribution 
involves  the  ethical  principle ;  is  necessarily  a  considera- 
tion of  ought  or  duty— a  consideration  in  which  the  idea 
of  right  or  justice  is  from  the  very  first  involved.  And 
this  idea  cannot  be  truly  conceived  of  as  having  limits  or 
being  subject  to  change,  for  it  is  an  idea  or  relation,  like 
the  idea  of  a  square  or  of  a  circle  or  of  parallel  lines,  which 
must  be  the  same  in  any  other  world,  no  matter  how  far 
separated  in  space  or  time,  as  in  this  world.  It  is  not 
without  reason  that  in  our  colloquial  use  of  the  words  we 


Chap.  IF.        PHYSICAL  LAWS  AND  MORAL  LAWS.        453 

speak  of  a  just  man  as  "a  square  man"  or  "a  straight 
man."     As  Montesquieu  says : 

Justice  is  a  relation  of  congruity  which  really  subsists  between 
two  things.  This  relation  is  always  the  same,  whatever  being  con- 
siders it,  whether  it  be  God,  or  an  angel,  or  lastly  a  man. 

This  I  take  to  be  the  reason  of  the  fact  which  in  Chapter 
II.  of  this  Book  was  referred  to— that  the  immutable  char- 
acter of  the  laws  of  distribution  is  even  more  quickly  and 
clearly  recognized  than  the  immutable  character  of  the 
laws  of  production.  Princes,  politicians  and  legislatures 
attempt  to  influence  distribution,  but  they  always  try  to  do 
it,  not  by  aiming  at  distribution  directly  but  by  aiming  at 
distribution  indirectly,  through  laws  that  directly  affect 
production. 


CHAPTER  V. 
OF   PROPERTY. 

SHOWING   THAT   PROPERTY   DEPENDS   UPON   NATURAL   LAW. 

The  law  of  distribution  must  be  the  law  which  determines  ownership 
—John  Stuart  Mill  recognizes  this ;  but  extending  his  error  treats 
property  as  a  matter  of  human  institution  solely— His  assertion 
quoted  and  examined — His  utilitarianism — His  further  contra- 
dictions. 

SINCE  the  distribution  of  wealth  is  an  assignment  of 
ownership,  the  laws  of  distribution  must  be  the  laws 
which  determine  property  in  the  things  produced.  Or  to 
put  it  in  another  way,  the  principle  which  gives  ownership 
must  be  the  principle  which  determines  the  distribution 
of  wealth.  Thus  what  we  may  speak  of  in  political  economy 
as  the  law  of  property  and  the  law  of  distribution  are  not 
merely  laws  of  the  same  kind,  springing  from  the  same 
principle,  but  are  in  reality  different  expressions  of  the 
same  fundamental  law.  Hence,  in  considering  the  origin 
and  basis  of  property  we  come  again  to  the  question,  is  it 
the  law  of  nature  or  the  laws  of  man  that  it  is  the  office  of 
the  science  of  political  economy  to  discover  ?  To  say  that 
the  distribution  of  wealth  is  "  a  matter  of  human  enactment 
solely"  is  to  say  that  property  can  have  no  other  basis 
than  human  law ;  while  to  admit  any  basis  of  property  in 
laws  of  nature  is  to  say  that  the  distribution  of  wealth  is 
a  matter  of  natural  law. 

454 


Chap.  V.  OF  PROPERTY. 

It  is  another  evidence  of  the  superiority  of  John  Stuart 
Mill  in  logical  acumen  that  he  seems  to  have  been  the 
only  one  of  the  accredited  economic  writers  who  has 
recognized  this  necessary  relation  between  the  laws  of 
distribution  and  the  origin  of  property.  From  the  intro- 
ductory section  of  his  Book  "  Distribution,"  the  section  I 
have  already  quoted  in  full,  he  proceeds  at  once  to  a 
consideration  of  the  origin  of  property,  and  indeed  the 
first  two  chapters  of  the  Book  are  entitled  "  Of  Property." 

But  he  is  consistent  in  error.  The  same  want  of 
discrimination  that  leads  him  to  treat  distribution  as  a 
matter  of  human  institution  solely,  leads  him  to  treat 
property  as  a  matter  of  human  institution  solely.  Hence, 
his  consideration  of  property  does  not,  as  it  should,  help 
him  to  see  the  incongruity  of  the  notion  that  while  the 
laws  of  production  are  natural  laws  the  laws  of  distribution 
are  human  laws;  but  gives  to  that  error  such  seeming 
plausibility  as  one  error  may  give  to  another.  Contra- 
dictions and  confusions  are  however  as  marked  in  his 
discussion  of  property  as  in  his  discussion  of  distribution. 

This  is  shown  in  the  introductory  paragraph  of  his 
treatment  of  property,  Book  II.,  Chapter  I.,  Sec.  2,  which 
is  as  follows. 

Private  property,  as  an  institution,  did  not  owe  its  origin  to  any  of 
those  considerations  of  utility,  which  plead  for  the  maintenance  of  it 
when  established.  Enough  is  known  of  rude  ages,  both  from  history 
and  from  analogous  states  of  society  in  our  own  time,  to  show,  that  tri- 
bunals (which  always  precede  laws)  were  originally  established,  not 
to  determine  rights,  but  to  repress  violence  and  terminate  quarrels. 
With  this  object  chiefly  in  view,  they  naturally  enough  gave  legal 
effect  to  first  occupancy,  by  treating  as  the  aggressor  the  person  who 
first  commenced  violence,  by  turning,  or  attempting  to  turn,  another 
out  of  possession.  The  preservation  of  the  peace,  which  was  the 
original  object  of  civil  government,  was  thus  attained;  while  by 
confirming,  to  those  who  already  possessed  it,  even  what  was  not  the 
fruit  of  personal  exertion,  a  guarantee  was  incidentally  given  to  them 
and  others  that  they  would  be  protected  in  what  was  so. 


456  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

All  this  I  deny.  It  is  in  fact  blank  contradiction.  Let 
the  reader  look  over  and  consider  it.  In  the  first  sentence 
we  are  told  that  private  property  did  not  originate  in 
considerations  of  utility.  In  the  second,  that  "  tribunals 
(which  always  precede  laws)  were  originally  established, 
not  to  determine  rights,  but  to  repress  violence  and 
terminate  quarrels."  In  the  third,  that  they  did  this  by 
treating  as  the  aggressor  the  person  who  first  commenced 
violence.  In  the  fourth,  that  the  preservation  of  the  peace 
was  the  original  object  of  such  tribunals,  and  that  by 
securing  possession  where  there  was  no  right  they 
incidentally  secured  possession  where  there  was  right. 

Thus,  the  first  sentence  asserts  that  private  property 
did  not  originate  in  considerations  of  utility,  and  the  three 
succeeding  sentences  that  it  did.  For  when  all  considera- 
tion of  right  is  eliminated  what  remains  as  a  reason  for 
the  preservation  of  the  peace  by  the  repression  of  violence 
and  the  termination  of  quarrels,  if  not  the  consideration 
of  utility?  What  Mill  tells  us,  is  that  society  originally 
acted  on  the  principle  of  the  schoolmaster  who  says,  "  If  I 
find  any  fighting  I  will  not  stop  to  ask  the  right  or  wrong, 
but  will  flog  the  boy  who  struck  the  first  blow,  for  I  cannot 
have  the  school  thrown  into  disorder."  If  this  is  not  a 
substitution  of  the  principle  of  utility  for  the  principle  of 
right,  what  is  it?  And  to  this  contradiction  of  himself, 
Mill  adds  that  by  confirming  wrongful  possession,  society 
incidentally  guarantees  rightful  possession !— something 
in  the  nature  of  things  as  impossible  as  that  two  railway 
trains  should  pass  each  other  on  a  single  track. 

The  fact  is  that  Mill  in  his  consideration  of  property  is 
caught  in  the  toils  of  that  utilitarian  philosophy  which 
seeks  to  make  the  principle  of  expediency  take  the  place 
of  the  principle  of  justice.  Men  can  no  more  do  this 
consistently  than  they  can  live  without  breathing,  and 
Mill  in  his  very  attempt  to  base  the  institution  of  property 


Chap.  V.  OF  PROPERTY.  457 

on  human  law  is  driven  despite  himself  into  recognizing 
the  moral  law,  and  into  talking  of  right  and  wrong,  of 
ought  and  ought  not,  of  just  and  unjust.  Now  these  are 
terms  which  imply  a  natural  law  of  morality.  They  can 
have  no  meaning  whatever  if  expediency  be  the  basis  of 
property  and  human  law  its  warrant. 

The  contradictions  of  this  paragraph  are  shown  through 
the  whole  consideration  of  property  it  introduces.  While 
he  strives  to  treat  property  as  a  matter  of  human  institution 
solely,  yet  over  and  over  again  we  find  Mill  forced  to 
abandon  this  position  and  appeal  to  something  superior 
to  human  institution— to  right  or  justice. 

Thus,  in  what  follows  the  paragraph  I  have  quoted,  we 
find  statements  utterly  contradictory  of  the  notion  that 
property  has  its  origin  in  expediency  and  is  determined 
by  human  enactment. 

In  the  very  next  section  to  that  in  which  we  are  told  that 
the  origin  of  property  is  not  in  justice  but  in  expediency, 
not  in  the  desire  to  determine  rights,  but  the  desire  to 
repress  violence,  we  are  told  (the  italics  being  mine) : 

The  social  arrangements  of  modern  Europe  commenced  from  a 
distribution  of  property  wh  ch  was  the  result,  not  of  just  partition,  or 
acquisition  by  industry,  but  of  conquest  and  violence  :  and  notwith- 
standing what  industry  has  been  doing  for  many  centuries  to  modify 
the  work  of  force,  the  system  still  retains  many  and  large  traces  of 
its  origin.  The  laws  of  property  have  never  yet  conformed  to  the 
principles  on  which  the  justification  of  private  property  rests.  They 
have  made  property  of  things  which  never  ought  to  be  made  property, 
and  absolute  property  where  only  a  qualified  property  ought  to  exist. 

Here  we  are  told  that,  as  a  matter  of  fact,  human  laws 
of  property  did  not  originate  in  the  expediency  of  repressing 
violence,  but  in  violence  itself  5  that  they  have  never  con- 
formed to  what  we  can  only  understand  as  the  natural  law 
of  property,  but  have  violated  that  natural  law,  by  treating 
as  property  things  that  under  it  are  not  property.  For  to 


458  THE  DISTRIBUTION  OF  WEALTH.         Boole  IV. 

say  that  a  human  law  ought  to  be  diff erent  from  what  the 
legislature  enacts  is  to  say  that  there  is  a  natural  law  by 
which  human  laws  are  to  be  tested. 

What  indeed  that  natural  law  of  property  is  by  which 
all  human  enactments  are  to  be  tested,  Mill  a  little  later 
shows  himself  to  be  conscious  of,  for  he  says : 

Private  property,  in  every  defense  made  of  it,  is  supposed  to  mean 
the  guarantee  to  individuals  of  the  fruits  of  their  own  labor  and 
abstinence. 

And  this  basis  of  a  natural  right  of  property— a  right 
which  is  unaffected  by  and  independent  of  all  human 
enactments— is  still  further  on  even  more  definitely  and 
clearly  stated : 

The  institution  of  property,  when  limited  to  its  essential  elements, 
consists  in  the  recognition,  in  each  person,  of  a  right  to  the  exclusive 
disposal  of  what  he  or  she  have  produced  by  their  own  exertions,  or 
received,  either  by  gift  or  by  fair  agreement,  without  force  or  fraud, 
from  those  who  produced  it.  The  foundation  of  the  whole  is,  the 
right  of  producers  to  what  they  themselves  have  produced. 

The  right  of  property  includes,  then,  the  freedom  of  acquiring 
by  contract.  The  right  of  each  to  what  he  has  produced,  implies  a 
right  to  what  has  been  produced  by  others,  if  obtained  by  their  free 
consent. 

After  thus  conceding  eve^thing  to  natural  law,  Mill 
becomes  concerned  again  for  human  law,  and  appeals  to 
the  "  categorical  imperative  "  of  Kant,  the  ought  of  moral 
law.  to  give  sanction  under  certain  circumstances  to 
human  law,  declaring  that : 

Possession  which  has  not  been  legally  questioned  within  a  moder- 
ate number  of  years,  ought  to  be,  as  by  the  laws  of  all  nations  it  is, 
a  complete  title. 

Then,  recognizing  for  a  moment  the  incongruity  of 
making  legal  possession— that  is  to  say  possession  by 


Chap.  V.  OF  PROPERTY.  459 

virtue  of  human  law— equivalent  to  possession  by  virtue 
of  natural  law,  he  continues : 

It  is  scarcely  needful  to  remark,  that  these  reasons  for  not  dis- 
turbing acts  of  injustice  of  old  date,  cannot  apply  to  unjust  systems 
or  institutions ;  since  a  bad  law  or  usage  is  not  one  bad  act,  in  the 
remote  past,  but  a  perpetual  repetition  of  bad  acts,  as  long  as  the  law 
or  usage  lasts. 

Now  property,  Mill  himself  has  always  spoken  of  as  a 
system  or  institution,  which  it  certainly  is.  And  he  has 
just  before  stated  that  the  existing  systems  or  institutions 
of  property  have  their  source  in  violence  and  force,  and 
therefore  are  certainly  in  his  own  view  unjust  and  bad. 
Hence  what  he  tells  us  here  is  in  plain  English  that  the 
sanction  of  prescription  cannot  be  pleaded  in  defense  of 
property  condemned  by  the  natural  or  moral  law.  This  is 
perfectly  true,  but  it  is  in  utter  contradiction  of  the  notion 
that  property  is  a  matter  of  human  law. 


CHAPTER  VI. 
CAUSE  OF  CONFUSION  AS  TO  PROPERTY. 

SHOWING  WHY  AND  HOW  POLITICAL  ECONOMISTS  FELL  INTO 
SUCH  CONFUSIONS  WITH  REGARD  TO  PROPERTY. 

Mill  blinded  by  the  pre-assumption  that  land  is  property— He  all  but 
states  later  the  true  principle  of  property,  but  recovers  by  substi- 
tuting in  place  of  the  economic  term  "land,"  the  word  in  its  col- 
loquial use— The  different  senses  of  the  word  illustrated  from  the 
shore  of  New  York  harbor— Mill  attempts  to  justify  property  in 
land,  but  succeeds  only  in  justifying  property  in  wealth. 

E!T  us  pause  a  moment  before  we  go  further  in  our 
examination  of  Mill's  reasoning.  What  is  it  that  so 
perplexes  this  trained  logician  and  honestly  minded  man, 
involving  him  in  such  utter  contradictions  and  confusions 
when  he  endeavors  to  trace  the  basis  of  property  ?  It  is 
evidently  the  same  thing  that  has  prevented  all  the 
scholastic  economists,  both  those  who  preceded  and  those 
who  have  succeeded  him,  from  giving  any  clear  and 
consistent  statement  of  the  laws  of  distribution  or  of  the 
origin  of  property.  This  is  a  pre-assumption  they  cannot 
bring  themselves  to  abandon— the  pre-assumption  that 
land  must  be  included  in  the  category  of  property  and  a 
place  found  in  the  laws  of  distribution  for  the  income  of 
landowners.  Since  natural  law  can  take  no  cognizance  of 
the  ownership  of  land,  they  are  driven  in  order  to  support 

460 


Chap.VL    CAUSE  OF  CONFUSION  AS  TO  PROPERTY.     461 

this  pre-assumption  to  treat  distribution  and  property  as 
matters  of  human  institution  solely. 

Mill,  who  though  befogged  by  his  utilitarian  philosophy 
is  in  many  respects  the  superior  of  all  these  writers,  starts 
on  his  investigation  of  distribution  and  property  with  the 
same  pre-assumption,  or,  to  use  our  colloquial  phrase, 
with  the  same  "  string  tied  to  his  leg."  He  had  been,  as 
they  all  have  been— from  the  really  great  Adam  Smith  to 
the  most  recent  purveyors  of  economic  nonsense  in  Anglo- 
German  jargon— accustomed  to  regard  property  in  land 
as  the  most  certain,  most  permanent,  most  tangible,  of  all 
property— that  which  the  lawyers  call  real  property,  and 
which  in  common  speech,  where  the  unqualified  word 
" property"  usually  means  landed  property,  is  recognized 
as  the  highest  expression  of  ownership.  And  his  logic  was 
not  strong  enough  to  permit  him  even  at  its  call  to  lay 
rude  hands  upon  what  to  Englishmen  of  his  class  and 
time  was  the  most  sacred  of  institutions— what  the  very 
Ark  of  the  Covenant  was  to  the  pious  Jew.  He  did  indeed, 
come  so  near  questioning  it  as  to  excite  the  dismay  of  his 
contemporaries  who  deemed  him  a  radical  of  radicals  for 
utterances  that  squint  towards  the  truth.  But  he  always 
draws  back  from  uttering  it. 

The  real  basis  of  property,  the  real  fundamental  law  of 
distribution,  is  so  clear  that  no  one  who  attempts  to  reason 
can  utterly  and  consistently  ignore  it.  It  is  the  natural 
law  which  gives  the  product  to  the  producer.  But  this 
cannot  be  made  to  cover  property  in  land.  Hence  the 
persistent  effort  to  find  the  origin  of  property  in  human 
law  and  its  base  in  expediency.  It  is  evident,  even  where 
Mill  speaks  of  property  generally,  as  he  has  done  in  what 
I  have  to  this  point  commented  on,  that  the  real  cause  of 
his  contradictions  and  confusions  is  that  he  has  always  in 
mind  property  in  land.  But  the  failure  of  the  attempt  to 
bring  this  species  of  property  under  the  only  possible 


462  THE  DISTRIBUTION  OF  WEALTH.         Book  IF. 

justification  of  property,  the  right  of  the  producer  to  the 
product,  is  even  more  painfully  clear  when  he  comes,  as 
he  does  in  Chapter  II.,  Sec.  3,  specifically  to  treat  of  it. 

He  begins  this  by  another  admission  of  the  truth  utterly 
inconsistent  with  the  derivation  of  property  from  expedi- 
ency; saying: 

Nothing  is  implied  in  property  but  the  right  of  each  to  his  (or  her) 
own  faculties. 

And  then  after  some  long  disquisitions  on  bequest  and 
inheritance  which  I  will  not  comment  on  here  lest  it  might 
divert  the  reader  from  the  main  subject,  he  continues 
again : 

The  essential  principle  of  property  being  to  assure  to  all  persons 
what  they  have  produced  by  their  labor  and  accumulated  by  their 
abstinence,  this  principle  cannot  apply  to  what  is  not  the  produce  of 
labor,  the  raw  material  of  the  earth. 

Abstinence  is  not  a  doing  but  a  not  doing,  a  refraining 
from  consuming.  The  essential  principle  of  property 
being  to  assure  to  all  persons  what  they  have  produced  by 
their  labor,  this  of  course  includes  what  having  been  pro- 
duced by  labor  is  afterwards  accumulated  by  abstinence. 
These  words  "  and  accumulated  by  their  abstinence "  are 
superfluous,  having  no  weight  or  place  in  the  argument, 
but  their  introduction  is  significant  of  the  disposition  to 
assume  that  capital  rather  than  labor  is  the  active  factor 
in  production. 

But  though  a  little  superfluous  in  phrase,  this  statement 
is  true  and  clear.  In  the  conflict  going  on  in  Mill's  mind 
the  perception  of  a  basis  of  property  in  natural  law  seems, 
in  the  admission  that  the  principle  of  property  cannot  apply 
to  land,  to  have  finally  conquered  both  the  notion  that  its 
basis  is  in  human  law  and  the  pre- assumption  from  which 
the  notion  comes. 


Chap.  VI.    CAUSE  OF  CONFUSION  AS  TO  PROPERTY.     463 

But  this  is  hardly  for  a  moment.  In  the  next  sentence, 
not  paragraph,  and  on  the  very  same  line  in  the  printed 
page,  the  pre-assumption  that  has  confused  him  asserts  its 
power  and  Mill  proceeds  to  argue  that  the  principle  of 
property  does  apply  to  land.  He  does  this  by  what  is  in 
reality,  though  doubtless  unconsciously  to  him,  a  juggle 
with  words.  But  as  his  argument  is  the  stock  argument 
of  the  scholastic  economists,  I  will  quote  it  in  full,  distin- 
guishing by  italics  the  sentence  already  given : 

TJie  essential  principle  of  property  being  to  assure  to  all  persons  what 
they  have  produced  by  their  labor  and  accumulated  by  their  abstinence, 
tJi is  principle  cannot  apply  to  what  is  not  the  produce  of  labor,  the  raw 
material  of  the  earth.  If  the  land  derived  its  productive  power  wholly 
from  nature,  and  not  at  all  from  industry,  or  if  there  were  any  means 
of  discriminating  what  is  derived  from  each  source,  it  not  only  would 
not  be  necessary,  but  it  would  be  the  height  of  injustice,  to  let  the 
gift  of  nature  be  engrossed  by  individuals.  The  use  of  the  land  in 
agriculture  must  indeed,  for  the  time  being,  be  of  necessity  exclusive ; 
the  same  person  who  has  plowed  and  sown  must  be  permitted  to 
reap ;  but  the  land  might  be  occupied  for  one  season  only,  as  among 
the  ancient  Germans ;  or  might  be  periodically  redivided  as  popula- 
tion increased :  or  the  State  might  be  the  universal  landlord,  and  the 
cultivators  tenants  under  it,  either  on  lease  or  at  will. 

But  though  land  is  not  the  produce  of  industry,  most  of  its  valu- 
able qualities  are  so.  Labor  is  not  only  requisite  for  using,  but 
almost  equally  so  for  fashioning,  the  instrument.  Considerable  labor 
is  often  required  at  the  commencement,  to  clear  the  land  for  cultiva- 
tion. In  many  cases,  even  when  cleared,  its  productiveness  is  wholly 
the  effect  of  labor  and  art.  The  Bedford  Level  produced  little  or 
nothing  until  artificially  drained.  The  bogs  of  Ireland,  until  the 
same  thing  is  done  to  them,  can  produce  little  besides  fuel.  One  of 
the  barrenest  soils  in  the  world,  composed  of  the  material  of  the 
Goodwin  Sands,  the  Pays  de  Waes  in  Flanders,  has  been  so  fertilized 
by  industry,  as  to  have  become  one  of  the  most  productive  in  Europe. 
Cultivation  also  requires  buildings  and  fences,  which  are  wholly  the 
produce  of  labor.  The  fruits  of  this  industry  cannot  be  reaped  in  a 
short  period.  The  labor  and  outlay  are  immediate,  the  benefit  is 
spread  over  many  years,  perhaps  over  all  future  time.  A  holder  will 
not  incur  this  labor  and  outlay  when  strangers  and  not  himself  will 


464  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

be  benefited  by  it.  If  he  undertakes  such  improvements,  he  must 
have  a  sufficient  period  before  him  in  which  to  profit  by  them ;  and 
he  is  in  no  way  so  sure  of  having  always  a  sufficient  period  as  when 
his  tenure  is  perpetual. 

These  are  the  reasons  which  form  the  justification  in  an  economi- 
cal point  of  view,  of  property  in  land. 

This  argument  begins  by  asserting  that  the  principle  of 
property  cannot  apply  to  land ;  it  ends  by  asserting  that  it 
does.  The  language  is  loose,  for  Mill  indulges  in  a  practice 
dangerous  where  exactness  is  important,  the  use  of  para- 
phrases for  economic  terms,  such  as  "raw  material  of  the 
earth"  and  "gift  of  nature"  for  land;  "industry"  for 
labor,  and  "valuable  qualities"*  for  useful  qualities,  or 
productive  powers.  But  carefully  to  consider  these  rea- 
sons which  are  held  to  justify  the  unjustifiable,  is  to  see 
that  their  plausibility  is  brought  about  by  the  same  way 
that  a  juggler  seems  to  change  a  watch  into  a  turnip— the 
substitution  of  one  thing  for  another  thing  while  attention 
is  distracted.  In  this  case  the  substitution  is  of  one  sense 
of  a  word  for  another  different  sense  of  the  same  word. 

The  word  land,  as  before  explained,  has  two  senses. 
One  of  these  is  that  of  the  dry  and  solid  superficies  of  the 
globe  as  distinguished  from  water  or  air,  or  that  of  the 
cultivatable  matter  of  the  earth  as  distinguished  from 
rock  or  sand  or  ice  or  bog.  In  this  sense  we  frequently 
speak  of  "improved  land"  or  "made  land."  The  other, 
the  economic  sense  of  the  word,  is  that  of  the  natural  or 
passive  element  in  production,  including  the  whole  exter- 
nal world,  with  all  its  powers,  qualities  and  products,  as 
distinguished  from  the  human  or  active  element,  labor, 
and  its  sub-element,  capital.  In  this  sense  we  cannot 

*  Value  in  political  economy  should  be  restricted  to  value  in 
exchange,  and  the  only  sense  in  which  land  or  other  natural  objects 
or  their  qualities  may  be  said  to  have  value  in  themselves  is  that  of 
value  in  use.  (See  Book  II.,  Chapter  X.) 


Cliap.VL    CAUSE  OF  CONFUSION  AS  TO  PROPERTY.     465 

speak  of  "  improved  land  "  or  "  made  land."  Such  phrases 
would  involve  contradiction  in  terms. 

Now  in  the  reasoning  just  quoted  Mill  slips  from  one  to 
the  other  of  these  two  senses  of  the  word  land,  not  merely 
in  the  same  connection,  but  in  the  same  sentence,  and 
even  as  between  the  noun  and  its  pronoun  without  notice 
to  the  reader  and  seemingly  without  consciousness  on  his 
own  part. 

The  first  suggestion  of  this  substitution  comes  in  the 
ifs  of  the  second  sentence.  If,  says  Mill,  land  derived  its 
productive  power  wholly  from  nature  and  not  at  all  from 
labor,  or  if  there  were  any  means  of  discriminating  what 
is  derived  from  each  source,  it  would  be  the  height  of 
injustice  to  let  land  be  engrossed  by  individuals. 

Why  these  ifsf  Mill  is  here  writing  as  a  political 
economist,  in  a  work  entitled  "Principles  of  Political 
Economy,"  and  for  the  purpose  in  this  particular  place  of 
discovering  whether  there  is  any  justification  from  an 
economic  point  of  view  of  property  in  land.  Land,  as  a 
term  of  political  economy,  means  that  element  of  productive 
power  derived  from  nature  and  not  at  all  from  labor.  It 
has  and  can  have  no  other  meaning.  The  first  principle 
of  political  economy  is  the  distinction  between  the  produc- 
tive power  derived  wholly  from  nature,  for  which  its  term 
is  land,  and  the  productive  power  derived  from  human 
exertion,  for  which  its  term  is  labor.  Where  the  reason 
can  find  no  "  means  of  discriminating  what  is  derived 
from  each  source,"  political  economy  becomes  impossible, 
and  to  confuse  this  discrimination  is  to  abandon  political 
economy. 

This  is  precisely  what  Mill  does,  when  he  goes  on  in  the 
first  sentence  of  the  next  paragraph  to  tell  us  that  "  though 
land  is  not  the  produce  of  industry,  most  of  its  valuable 
qualities  are  so."  He  is  abandoning  political  economy 
by  dropping  in  the  pronoun  the  sense  in  which  he  uses 


466  THE  DISTRIBUTION  OF  WEALTH.         Book  IF. 

the  word  land  in  the  noun,  and  falling  with  seeming 
unconsciousness  into  the  vague  sense  of  common  speech. 
When  he  says  that  land  is  not  the  produce  of  industry  he 
uses  the  word  in  the  economic  sense.  But  when  he  says 
that  qualities  of  land  are  the  produce  of  labor  he  is  using 
the  word  in  that  loose  ordinary  sense  in  which  we  speak 
of  "improved  land"  or  "made  land."  For  what  single 
quality  of  land  in  the  economic  sense  of  the  word  is  the 
produce  of  labor?  Is  it  gravitation?  Is  it  extension? 
Is  it  cohesion?  Is  it  chemical  affinities  or  repulsions? 
Is  it  the  qualities  shown  in  generation  and  germination 
and  growth  ?  Why,  Mill  himself  in  the  first  chapter  of  the 
first  book  of  his  "  Principles  of  Political  Economy  "  declares 
that  the  primary  power  of  labor,  that  by  which  man  can 
alone  act  on  the  external  world,  consists  in  that  power  of 
muscular  contraction  by  means  of  which  he  can  to  some 
slight  extent  move  or  arrest  the  motion  of  matter,  adding : 

Labor,  then,  in  the  physical  world,  is  always  and  solely  employed  in 
putting  objects  in  motion ;  the  properties  of  matter,  the  laws  of 
nature,  do  all  the  rest. 

These  properties  of  matter,  these  laws  of  nature  which 
when  labor  changes  things  in  place  do  all  the  rest,  are 
qualities  of  land  in  the  economic  sense  of  the  word  land. 
Mill  does  not  mean  that  they  are  ever  the  produce  of 
industry?  He  cannot  mean  that.  The  fact  is,  that 
abandoning  the  economic  sense  of  the  word  land,  he  resorts 
to  that  loose  colloquial  sense  of  the  word  in  which  we 
speak  of  "  improving  land  "or  "  making  land."  And  it  is 
with  illustrations  of  "improved  land"  and  "made  land" 
that  he  goes  on  to  show  how  the  qualities  of  land  are 
products  of  labor. 

Let  me  too  do  a  little  illustrating,  for  the  confusions  to 
which  Mill  succumbed  are  in  these  closing  years  of  the 


Chap.VI.    CAUSE  OF  CONFUSION  AS  TO  PROPERTY.     467 

century  being  crammed  into  the  minds  of  young  people 
by  a  thousand  "  professors  of  political  economy :  " 

I  am  writing  these  pages  on  the  shore  of  Long  Island, 
where  the  Bay  of  New  York  contracts  to  what  is  called 
the  Narrows,  nearly  opposite  the  point  where  our  legalized 
robbers,  the  Custom-House  officers,  board  incoming 
steamers  to  ask  strangers  to  take  their  first  American 
swear,  and  where  if  false  oaths  really  colored  the  atmo- 
sphere the  air  would  be  bluer  than  is  the  sky  on  this 
gracious  day.  I  turn  from  my  writing-machine  to  the 
window,  and  drink  in,  with  a  pleasure  that  never  seems  to 
pall,  the  glorious  panorama. 

"  What  do  you  see  ? "  If  in  ordinary  talk  I  were  asked 
this,  I  should  of  course  say,  "I  see  land  and  water  and 
sky,  ships  and  houses  and  light  clouds,  and  the  sun, 
drawing  to  its  setting,  over  the  low  green  hills  of  Staten 
Island,  and  illuminating  all." 

But  if  the  question  refer  to  the  terms  of  political  economy, 
I  should  say,  "  I  see  land  and  wealth."  Land,  which  is  the 
natural  factor  of  production;  and  wealth,  which  is  the 
natural  factor  so  changed  by  the  exertion  of  the  human 
factor,  labor,  as  to  fit  it  for  the  satisfaction  of  human  de- 
sires. For  water  and  clouds,  sky  and  sun,  and  the  stars  that 
will  appear  when  the  sun  is  sunk,  are,  in  the  terminology 
of  political  economy,  as  much  land  as  is  the  dry  surface  of 
the  earth  to  which  we  narrow  the  meaning  of  the  word  in 
ordinary  talk.  And  the  window  through  which  I  look; 
the  flowers  in  the  garden ;  the  planted  trees  of  the  orchard ; 
the  cow  that  is  browsing  beneath  them ;  the  Shore  Road 
under  the  window ;  the  vessels  that  lie  at  anchor  near  the 
bank,  and  the  little  pier  that  juts  out  from  it ;  the  trans- 
Atlantic  liner  steaming  through  the  channel ;  the  crowded 
pleasure-steamers  passing  by ;  the  puffing  tug  with  its  line 
of  mud-scows ;  the  fort  and  dwellings  on  the  opposite  side 


468  THE  DISTRIBUTION  OF  WEALTH.         Book  IV. 

of  the  Narrows ;  the  lighthouse  that  will  soon  begin  to 
cast  its  far-gleaming  eye  from  Sandy  Hook;  the  big 
wooden  elephant  of  Coney  Island  ;  and  the  graceful  sweep 
of  the  Brooklyn  Bridge,  that  may  be  discovered  from  a 
little  higher  up;  all  alike  fall  into  the  economic  term 
wealth— land  modified  by  labor  so  as  to  afford  satisfaction 
to  human  desires.  All  in  this  panorama  that  was  before 
man  came  here,  and  would  remain  were  he  to  go,  belongs 
to  the  economic  category  land;  while  all  that  has  been 
produced  by  labor  belongs  to  the  economic  category  wealth, 
so  long  as  it  retains  its  quality  of  ministering  to  human 
desire. 

But  on  the  hither  shore,  in  view  from  the  window,  is  a 
little  rectangular  piece  of  dry  surface,  evidently  reclaimed 
from  the  line  of  water  by  filling  in  with  rocks  and  earth. 
What  is  that?  In  ordinary  speech  it  is  land,  as  distin- 
guished from  water,  and  I  should  intelligibly  indicate  its 
origin  by  speaking  of  it  as  "made  land."  But  in  the 
categories  of  political  economy  there  is  no  place  for  such 
a  term  as  "made  land."  For  the  term  land  refers  only 
and  exclusively  to  productive  powers  derived  wholly  from 
nature  and  not  at  all  from  industry,  and  whatever  is,  and 
in  so  far  as  it  is,  derived  from  land  by  the  exertion  of  labor, 
is  wealth.  This  bit  of  dry  surface  raised  above  the  level 
of  the  water  by  filling  in  stones  and  soil,  is,  in  the  economic 
category,  not  land,  but  wealth.  It  has  land  below  it  and 
around  it,  and  the  material  of  which  it  is  composed  has 
been  drawn  from  land ;  but  in  itself  it  is,  in  the  proper 
speech  of  political  economy,  wealth ;  just  as  truly  as  the 
ships  I  behold  are  not  land  but  wealth,  though  they  too 
have  land  below  them  and  around  them  and  are  composed 
of  materials  drawn  from  land. 

Now  here  is  the  evident  confusion  in  Mill's  thought, 
which  he  has  perplexed  by  dropping  from  the  terminology 
of  political  economy  to  the  language  of  ordinary  speech. 


Chap.n.  CAUSE  OF  CONFUSION  AS  TO  PROPERTY.  469 

The  Bedford  Level,  which  is  land  that  has  been  drained ; 
the  cultivatable  bog  of  Ireland,  which  is  land  that  has  had 
a  coating  of  soil  put  on  it ;  the  improved  farms  he  refers 
to,  which  are  land  cleared  or  manured  by  labor,  belong  all 
of  them  to  the  same  economic  category  as  the  little  piece 
of  "  made  land  "  visible  from  my  window.  In  the  qualities 
that  he  is  considering  in  them  they  are  all  of  them  in  the 
economic  meaning  not  land  at  all,  but  wealth;  not  the 
free  gift  of  nature,  but  the  toil-earned  produce  of  labor. 
In  this,  and  so  far  as  these  qualities  go,  but  no  further- 
that  is,  in  so  far  as  they  are  wealth,  not  land,  they  are 
property ;  not  because  human  agency  can  add  any  qualities 
to  the  natural  factor,  land;  but  because  of  the  natural 
law  of  property,  which  gives  to  the  producer  the  ownership 
of  what  his  labor  has  produced. 

Mill  seems  to  think  that  he  has  shown  the  justification 
of  property  in  land,  but  the  reasons  he  gives  only  justify 
property  in  the  produce  of  labor ;  thus  in  his  own  case 
adding  a  signal  instance  of  the  truth  of  what  he  has  before 
said  that "  in  every  defense  made  of  it,  property  is  supposed 
to  mean  the  guarantee  to  individuals  of  the  fruits  of  their 
own  labor." 


BOOK  V. 


MONEY— THE  MEDIUM  OF  EXCHANGE  AND 
MEASURE  OF  VALUE 


CONTENTS  OF  BOOK  V. 


MONEY— THE  MEDIUM  OF  EXCHANGE  AND 
MEASURE  OF  VALUE. 


PAGE 

INTRODUCTION  TO  BOOK  V.  .  477 


CHAPTER  I. 
CONFUSIONS  AS  TO  MONEY. 

SHOWING  THE   DIVERGENCE   IN   COMMON   THOUGHT  AND   AMONG 
ECONOMISTS  AS   TO   MONEY. 

Present  confusions  as  to  money — Their  cause — How  to  disen- 
tangle them 479 


CHAPTER  II. 
THE  COMMON  UNDERSTANDING  OF  MONEY. 

SHOWING  THAT  THE  COMMON  USE  OF  MONEY  IS  TO  BUY  THINGS 
WITH,  AND  THAT  ITS  ESSENTIAL  CHARACTER  IS  NOT  IN  ITS  MA- 
TERIAL, BUT  IN  ITS  USE. 

The  use  of  money  to  exchange  for  other  things — Buying  and  sell- 
ing— Illustration  of  the  travelers — Money  not  more  valuable 
than  other  things,  but  more  readily  exchangeable — Exchanges 
without  money — Checks,  etc.,  not  money — Different  money  in 
different  countries — But  money  not  made  by  government  fiat — 
Does  not  necessarily  consist  of 'gold  and  silver — Or  need  intrin- 
sic value— Its  essential  quality  and  definition  .  .  .  .482 

473 


474          CONTENTS  OF  BOOK  V. 

CHAPTER  III. 
MEDIUM  OF  EXCHANGE  AND  MEASURE  OF  VALUE. 

SHOWING  HOW  THE  COMMON  MEDIUM  OF  EXCHANGE  BECOMES  THE 
COMMON  MEASURE  OF  VALUE,  AND  WHY  WE  CANNOT  FIND  A  COM- 
MON MEASURE  IN  LABOR. 

PAGE 

Money  is  most  exchanged — Why  not  measure  value  by  labor? 
— Smith's  unsatisfactory  answer — The  true  answer — Labor  can 
afford  no  common  measure,  and  commodities  are  preferably 
taken — Survivals  of  common  measures — Difference  in  common 
measures  does  not  prevent  exchange  .....  495 

CHAPTER  IV. 
THE  OFFICE   OF   CREDIT  IN  EXCHANGES. 

SHOWING  THAT  THE  ADVANCE  OF  CIVILIZATION  ECONOMIZES 
THE   USE   OF  MONEY. 

Tendency  to  over-estimate  the  importance  of  money — Credit 
existed  before  the  use  of  money  began — And  it  is  now  and 
always  has  been  the  most  important  instrument  of  exchange — 
Illustration  of  shipwrecked  men — Adam  Smith's  error  as  to 
barter — Money's  most  important  use  to-day  is  as  a  measure  of 
value 504 

CHAPTER  V. 
THE   GENESIS  OF   MONEY. 

SHOWING  THAT  THE  LAW  OF  GRATIFYING  DESIRES  WITH  THE 
LEAST  EXERTION  PROMPTS  THE  USE  FROM  TIME  TO  TIME  OF 
THE  MOST  LABOR-SAVING  MEDIUM  AVAILABLE. 

Money  not  an  invention,  but  developed  by  civilization — It  grows 
with  the  growth  of  exchanges — Exchange  first  of  general  com- 
modities— Then  of  the  more  convenient  commodities — Then 
of  coin,  whose  commodity  value  comes  to  be  forgotten — Illus- 
tration of  the  American  trade  dollar— The  lessening  uses  of 
commodity  money  and  extensions  of  credit  money — Two  ele- 
ments in  exchange  value  of  metal  coin :  intrinsic,  or  value  of 
the  metal  itself ;  and  seigniorage — Meaning  of  seigniorage- 
Exchange  value  of  paper  money  is  seigniorage — Use  of  money 
is  not  for  consumption,  but  exchange — Proprietary  articles  as 
mediums  of  exchange — Mutilated  coins — When  lessening  metal 
value  in  coins  does  not  lessen  circulating  value — The  essential 


CONTENTS  OF  BOOK  V.  475 

PAGE 

being  that  both  represent  the  same  exertion — This  the  reason 
why  paper  money  exchanges  equally  with  metal  money  of  like 
denomination  ...  .  512 


CHAPTER  VI. 
THE  TWO  KINDS  OF  MONEY. 

SHOWING  THAT  ONE  ORIGINATES  IN  VALUE  FROM  PRODUC- 
TION AND  THE  OTHER  IN  VALUE  FROM  OBLIGATION. 


Money  peculiarly  the  representative  of  value — Two  kinds  of 


value — Gold  coin  the  only  intrinsic  value  money  now  in  cir- 
culation in  the  United  States,  England,  France  or  Germany  526 


INTRODUCTION  TO  BOOK  V. 

THIS  Book  is  really  in  the  nature  of  a  supplement  to 
Book  II.,  "  The  Nature  of  Wealth."  In  my  first  draft 
of  arrangement,  a  matter  of  much  perplexity,  the  discussion 
of  money  was  to  have  followed  the  discussion  of  value, 
with  which  it  is  so  intimately  connected  j  or  at  least,  to  have 
followed  the  discussion  as  to  the  definition  of  wealth.  But 
to  have  given  to  the  subject  of  money  in  Book  II.  the 
thorough  treatment  which  present  confusions  seem  to 
require  would  not  only  have  disproportionately  expanded 
that  Book,  but  would  have  made  needful  the  anticipation 
of  some  of  the  conclusions  more  logically  and  conveniently 
reached  in  Book  III.  and  Book  IV.  I  therefore  finally 
determined  as  the  best  arrangement  for  the  reader  of  this 
work  to  answer  briefly  in  the  last  chapter  of  Book  II.  the 
question  as  to  the  relation  of  money  to  wealth  which  the 
conclusion  of  the  discussion  of  the  nature  of  wealth  would 
be  certain  to  bring,  and  to  defer  a  fuller  discussion  of  the 
subject  of  money  until  after  the  production  and  distribution 
of  wealth  had  both  been  treated.  This  point  has  now  been 
reached,  and  continuing  as  it  were  Chapter  XXI.  of 
Book  II.,  "The  Nature  of  Wealth,"  I  proceed  to  the 
discussion  of  the  medium  of  exchange  and  measure  of 
value. 


CHAPTER  I. 
CONFUSIONS  AS  TO  MONEY. 

SHOWING  THE  DIVERGENCE  IN  COMMON  THOUGHT  AND  AMONG 
ECONOMISTS  AS  TO  MONEY. 

Present  confusions  as  to  money— Their  cause— How  to  disentangle 

them. 

r  1 1HERE  is  no  social  idea  or  instrument  with  which 
I  civilized  men  are  more  generally  and  personally 
familiar  than  money.  From  early  infancy  to  latest  age 
we  all  use  it  in  thought  and  speech  and  daily  trans- 
actions, without  practical  difficulty  in  distinguishing  what 
is  money  from  what  is  not  money.  Yet  as  to  what  it 
really  is  and  what  it  really  does,  there  are  both  in  common 
thought  on  economic  subjects  and  in  the  writings  of 
professed  economists  the  widest  divergences.  This  is 
particularly  obvious  in  the  United  States  at  the  time  I 
write.  For  twenty  years  the  money  question  has  been 
under  wide  discussion,  and  before  that,  has  had  similar 
periods  of  wide  discussion  from  the  very  foundation  of 
the  American  colonies,  to  say  nothing  of  the  discussion 
that  has  gone  on  in  Europe.  Yet  the  attitude  of  Congress, 
of  the  State  legislatures,  of  the  political  parties,  and  the 
press,  shows  that  nothing  like  any  clear  conclusion  as-  to 
first  principles  has  yet  been  arrived  at.  As  for  the  vast 
literature  of  the  subject  which  has  been  put  into  print 
within  recent  years  any  attempt  to  extract  from  it  a 
consensus  of  opinion  as  to  the  office  and  laws  of  money  is 

479 


480  OF  MONEY.  Book  V. 

likely  to  result  in  the  feeling  expressed  by  an  intelligent 
man  who  recently  made  this  attempt,  that  "  The  more  one 
reads  the  more  he  feels  that  any  sure  knowledge  on  the 
question  is  beyond  his  comprehension." 

The  very  latest  American  cyclopedia  (Johnson's,  1896) 
gives  this  definition:  " Money  is  that  kind  of  currency 
which  has  an  intrinsic  value,  and  which  thus  if  not  used 
as  currency  would  still  be  wealth."  Thus,  there  are  some 
who  say  that  money  really  consists  of  the  precious  metals, 
and  that  whatever  may  be  locally  or  temporarily  or  par- 
tially used  as  money  can  be  so  used  only  as  a  represen- 
tative of  these  metals.  They  hold  that  the  paper  money 
which  now  constitutes  so  large  a  part  of  the  currency  of 
the  civilized  world  derives  its  value  from  the  promise, 
expressed  or  implied,  to  redeem  it  in  one  or  another  of 
these  metals,  and  by  way  of  assuring  such  redemption  vast 
quantities  of  these  precious  metals  are  kept  idly  in  store 
by  governments  and  banks. 

Of  those  who  take  this  view,  some  hold  that  gold  is  the 
only  true  and  natural  money,  in  the  present  stage  of 
civilization  at  least;  while  others  hold  that  silver  is  as 
much  or  even  more  entitled  to  that  place,  and  that  the 
gravest  evils  result  from  its  demonetization. 

On  the  other  hand  there  are  those  who  say  that  what 
makes  a  thing  money  is  the  edict  or  fiat  of  government 
that  it  shall  be  treated  and  received  as  money. 

And  again,  there  are  others  still  who  contend  that 
whatever  can  be  used  in  exchange  to  the  avoidance  of 
barter  is  money,  thus  including  in  the  meaning  of  the 
term,  notes,  checks,  drafts,  etc.,  issued  by  private  parties,  as 
fully  as  the  coins  or  notes  issued  by  governments  or  banks. 

Much  of  the  contradiction  and  confusion  which  exists 
in  popular  thought  proceeds  from  the  pressure  of  personal 
interests  brought  into  the  question  by  the  relation  of  debtor 
and  creditor.  But  the  confusions  which  prevail  among 
professed  economists  have  a  deeper  source.  They  evidently 


Chap.  I.  CONFUSIONS  AS  TO  MONEY.  481 

result  from  the  confusions  which  prevail  in  economic 
thought  and  teaching  as  to  the  nature  of  wealth  and  the 
cause  of  value.  Money  is  the  common  measure  of  value, 
the  common  representative  and  exchanger  of  wealth. 
Unless  we  have  clear  ideas  of  the  meaning  of  value  and  the 
nature  of  wealth,  it  is  manifest  therefore  that  we  cannot 
form  clear  ideas  as  to  the  nature  and  functions  of  money. 
But  since  we  have  cleared  up  in  the  preceding  chapters  the 
meaning  of  the  terms  value  and  wealth,  we  are  now  in 
a  position  to  proceed  with  an  inquiry  into  the  nature, 
functions  and  laws  of  money.  It  is  unnecessary  to  waste 
time  with  any  attempt  to  disentangle  the  maze  of  contra- 
dictory statements  of  fact  and  confusions  of  opinion  with 
which  the  current  literature  of  the  subject  is  embarrassed. 
The  true  course  of  all  economic  investigation  is  to  observe 
and  trace  the  relation  of  those  social  phenomena  that  are 
obvious  now  and  to  us.  For  economic  laws  must  be  as 
invariable  as  physical  laws,  and  as  the  chemist  or  astronomer 
can  safely  proceed  only  from  relations  which  he  sees  do  here 
and  now  exist  to  infer  what  has  existed  or  will  exist  in  an- 
other time  and  place,  so  it  is  with  the  political  economist. 

Yet  we  find,  if  we  consider  them,  that  these  divergences 
in  the  definition  of  money  spring  rather  from  differences 
of  opinion  as  to  what  ought  to  be  considered  and  treated 
as  money,  than  from  differences  as  to  what,  as  a  matter 
of  fact,  money  actually  is.  The  men  who  differ  most 
widely  in  defining  money  find  no  difficulty  in  agreeing  as 
to  what  is  meant  by  money  in  daily  transactions.  Since 
we  cannot  find  a  consensus  of  opinion  among  economists, 
our  best  plan  is  to  seek  it  among  ordinary  people.  To 
see  what  usually  is  meant  by  money  we  have  only  to  note 
the  essential  characteristics  of  that  which  we  all  agree  in 
treating  as  money  in  our  practical  affairs. 

After  we  have  seen  what  money  really  is,  and  what  are 
the  functions  it  performs,  we  shall  then  be  in  a  position  to 
determine  what  are  the  best  forms  of  money. 


CHAPTER  II. 
THE  COMMON  UNDERSTANDING  OF  MONEY. 

SHOWING  THAT  THE  COMMON  USE  OF  MONEY  IS  TO  BUY 
THINGS  WITH,  AND  THAT  ITS  ESSENTIAL  CHARACTER  IS 
NOT  IN  ITS  MATERIAL  BUT  IN  ITS  USE. 

The  use  of  money  to  exchange  for  other  things— Buying  and  selling 
— Illustration  of  the  travelers — Money  not  more  valuable  than 
other  things,  but  more  readily  exchangeable— Exchanges  without 
money— Checks,  etc.,  not  money— Different  money  in  different 
countries— But  money  not  made  by  government  fiat— Does  not 
necessarily  consist  of  gold  and  silver — Or  need  intrinsic  value — 
Its  essential  quality  and  definition. 

WHEN  we  are  confused  as  to  the  true  meaning  of  an 
economic  term,  our  best  plan  is  to  endeavor  to 
obtain  a  consensus  of  opinion  as  to  what  the  thing  really 
is ;  what  function  it  really  performs. 

If  I  have  agreed  to  pay  money  to  another  the  common 
understanding  of  what  money  is  will  not  hold  my  agree- 
ment fulfilled  if  I  offer  him  wood,  or  bricks,  or  services,  or 
gold  or  silver  bullion,  even  though,  as  closely  as  can  be 
estimated,  these  may  be  of  equal  value  to  the  money 
promised.  My  creditor  might  take  such  things  in  lieu  of 
what  I  had  agreed  to  pay.  But  he  would  be  more  likely 
to  object,  and  his  objection  if  fully  expressed  would 
amount  to  this:  "What  you  agreed  to  pay  me  was 
money.  With  money  I  can  buy  anything  that  any  one 
has  to  sell,  and  pay  any  debt  I  owe.  But  what  you  offer 

482 


Chap.  II.         COMMON  UNDERSTANDING  OF  MONEY.        483 

me  is  not  money.  It  is  something  I  would  be  willing  to 
take  if  I  happened  to  have  any  personal  use  for  it.  But 
I  have  no  personal  use  for  it,  and  to  get  any  one  to  give 
me  for  it  what  I  may  want  I  must  find  some  one  who  wants 
this  particular  thing  and  make  a  trade  with  him.  What 
you  propose  would  therefore  put  on  me  trouble,  risk  and 
loss  not  contemplated  in  our  agreement."  And  the  justice 
of  this  objection  would  be  recognized  by  all  fair  men. 

In  this— in  the  ease  with  which  it  may  be  passed  from 
hand  to  hand  in  canceling  obligations  or  transferring 
ownership— lies  the  peculiar  characteristic  of  money.  It 
is  not  the  intrinsic  nature  of  the  thing,  but  the  use  to 
which  it  is  applied  that  gives  its  essential  character  to 
money,  and  constitutes  the  distinction  between  it  and 
other  things.  Even  children  recognize  this.  I  make 
friends  with  a  little  one  of  four  or  five,  and,  showing  it  a 
stick  of  candy,  ask  what  that  is  for  ?  it  will  say,  "  That 
is  to  eat."  If  I  show  a  hat  or  a  pair  of  shoes,  it  will  say, 
"  That  is  to  wear."  If  I  show  a  toy,  it  will  say,  "  That  is 
to  play  with."  But  if  I  show  a  piece  of  money,  it  will  say, 
even  though  to  it  as  yet  all  money  may  be  pennies,  "  That 
is  to  buy  things  with." 

Now,  in  this,  the  little  child  will  give  a  definition  of 
money  that,  whatever  may  be  our  monetary  theories,  we 
all  practically  recognize.  The  peculiar  use  of  money— 
what  as  money  "  it  is  for  n— is  that  of  buying  other  things. 
What  by  virtue  of  this  use  is  money,  may  or  may  not  have 
capability  for  any  other  use.  That  is  not  material.  For 
so  long  as  a  thing  is  reserved  to  the  use  of  buying  things 
any  use  inconsistent  with  this  use  is  excluded. 

We  might,  for  instance,  apply  sticks  of  candy  to  the  use 
of  buying  things.  But  the  moment  a  stick  of  candy  was 
applied  to  the  use  of  being  eaten  its  use  in  buying  things 
would  end.  So,  if  a  greenback  be  used  to  light  a  cigar, 
or  a  gold  coin  converted  to  the  use  of  filling  teeth,  or  of 


484  OF  MONEY.  Book  V. 

being  beaten  into  gold-leaf,  its  use  as  money  is  destroyed. 
Even  where  coins  are  used  as  ornaments,  their  use  as 
money  is  during  that  time  prevented. 

In  short,  the  use  of  money,  no  matter  of  what  it  be 
composed,  is  not  directly  to  satisfy  desire,  but  indirectly 
to  satisfy  desire  through  exchange  for  other  things.  We  do 
not  eat  money  nor  drink  money  nor  wear  money.  We  pass 
it.  That  is  to  say,  we  buy  other  things  with  it.  We  esteem 
money  and  seek  it,  not  for  itself,  but  for  what  we  may 
obtain  by  parting  with  it,  and  for  the  purpose  of  thus 
parting  with  it.  This  is  true  even  where  money  is  hoarded, 
for  the  gratification  which  hoarding  gives  is  the  conscious- 
ness of  holding  at  command  that  with  which  we  may 
readily  buy  anything  we  may  wish  to  have. 

The  little  child  I  have  supposed  would  probably  not 
know  the  meaning  of  the  word  exchange,  which  is  that  of 
the  voluntary  transfer  of  desired  things  for  desired  things. 
But  it  would  know  the  thing,  having  become  familiar  with 
it  in  the  little  exchanges  that  go  on  between  children— in 
the  giving  of  marbles  for  tops,  of  candy  for  toys,  or  in 
transactions  based  on  "  I  will  do  this  for  you,  if  you  will 
do  that  for  me."  But  such  exchanges  it  would  probably 
speak  of  as  trades  or  swaps  or  promises,  reserving  the 
words  buying  or  selling  to  exchanges  in  which  money  is 
used. 

In  this  use  of  words  the  child  would  conform  to  a 
practice  that  has  become  common  among  careful  writers. 
In  the  wider  sense,  buying  and  selling  merely  distinguish 
between  the  giver  and  receiver  in  exchange ;  and  it  is  in 
this  wider  sense  that  Adam  Smith  uses  the  words,  and  as 
in  poetry  or  poetical  expression  we  continue  to  use  them. 
But  both  in  ordinary  usage  and  in  political  economy  we 
now  more  generally  confine  the  words  buying  and  selling 
to  exchanges  in  which  money  is  given  or  promised,  speaking 
of  an  exchange  in  which  money  is  not  involved,  as  a  barter 


Chap.  II.        COMMON  UNDERSTANDING  OF  MONEY.         485 

or  trade,  or  simply  an  exchange.  It  is  where  money  is 
one  of  the  things  exchanged  that  the  transaction  is  called 
a  purchase  and  sale ;  the  party  who  gives  money  for  an- 
other thing  being  termed  the  buyer,  and  the  party  who  gives 
the  other  thing  for  the  money  being  termed  the  seller. 

In  this  usage,  we  habitually  treat  money  as  though  it 
were  the  more  notable  or  more  important  side  of  exchanges 
in  which  things  not  money  are  given  for  money— that  side 
of  exchange  from  which  or  towards  which  the  initiative 
impulse  proceeds.  And  there  is  another  usage  which 
points  in  the  same  direction.  Among  the  masses  of  our 
people  at  least,  and  I  presume  the  same  usage  obtains  in 
all  countries,  good  manners  is  held  to  require  that  where 
money  passes  in  a  transaction  of  exchange,  the  receiver  of 
the  money  should  by  some  such  phrase  as  "  Thank  you," 
indicate  a  sense  of  benefit  or  obligation. 

The  reason  of  both  these  usages  is,  I  think,  to  be  found 
in  the  fact  that  money  is  the  thing  in  which  gain  or  profit 
is  usually  estimated ;  the  thing  which  can  usually  be  most 
readily  and  certainly  exchanged  for  any  other  thing. 
Thus  whatever  difficulty  there  may  be  in  exchanging 
particular  commodities  or  services  for  other  commodities 
or  services  is  generally  most  felt  in  exchanging  them  for 
money.  That  exchange  once  made,  any  subsequent 
exchange  of  the  money  for  the  things  that  are  the  ultimate 
objects  of  desire  is  comparatively  easy.  It  is  this  that 
makes  it  seem  to  those  who  do  not  look  closely,  that  what 
is  sought  in  exchange  is  money,  and  that  he  who  gets 
money  in  return  for  other  things,  is  in  a  better  position 
than  he  who  gets  other  things  in  return  for  money. 

To  see  in  what  money  really  differs  from  other  things 
having  exchangeable  or  purchasing  power  let  us  imagine 
a  number  of  men  to  undertake  a  journey  through  a 
country  where  they  have  no  personal  acquaintance.  Let 
them  for  instance  start  from  New  York,  in  pleasant 


486  OF  MONEY.  Boole  V. 

weather,  to  make  a  leisurely  trip  by  the  highroads  for 
one  to  two  hundred  miles.  Let  them  for  the  defrayal  of 
the  expenses  of  the  journey  provide  themselves  with 
exchangeable  things  of  different  kinds.  Imagine  one  to 
have  a  valuable  horse  ;  another  some  staple  commodity, 
such  as  tobacco  or  tea ;  another  gold  and  silver  bullion ; 
another  a  check  or  bill  of  exchange,  or  a  check-book  j  and 
a  fifth  to  have  current  money.  These  things  might  have 
value  to  the  same  amount,  but  at  the  first  stop  for  rest 
and  refreshment  the  great  difference  between  them  as  to 
readiness  of  convertibility  would  be  seen. 

The  only  way  the  man  with  the  horse  could  pay  for  the 
slightest  entertainment  for  man  or  beast,  without  selling 
his  horse  for  money,  or  bartering  for  things  that  might 
be  very  inconvenient  to  carry,  would  be  by  trading  him 
for  a  less  valuable  horse.  It  is  clear  that  he  could  not  go 
far  in  this  way,  for,  to  say  nothing  of  the  delays  incident 
to  horse  trades,  he  would,  if  he  persisted  in  them  under 
pressure  of  his  desire  to  go  on,  soon  find  himself  reduced 
to  an  animal  that  could  hardly  carry  himself. 

Though  of  all  staple  commodities,  tobacco  and  tea  are 
probably  those  most  readily  divisible  and  easily  carried, 
the  tourist  who  tried  to  pay  his  way  with  them  would  find 
much  difficulty.  If  not  driven  to  sell  his  stock  outright 
for  what  money  he  could  get,  he  would  virtually  have  to 
convert  his  pleasure  excursion  into  a  peddling  trip  j  and, 
to  say  nothing  of  the  danger  he  would  run  of  being 
arrested  for  infringement  of  Federal  or  local  license  laws, 
would  be  put  to  much  delay,  loss  and  annoyance  in  finding 
those  willing  to  give  the  particular  things  he  needed  for 
the  particular  things  he  had. 

And  while  gold  and  silver  are  of  all  commodities  those 
which  have  the  most  uniform  and  staple  value,  yet  the 
man  who  had  started  with  bullion  would,  after  he  had 
left  the  city,  hardly  find  any  one  who  could  tell  their  real 


Chap.  II.         COMMON  UNDERSTANDING  OF  MONEY.        487 

value  or  was  willing  to  take  them  in  return  for  commod- 
ities or  service.  To  exchange  them  at  all  at  anything  like 
a  reasonable  rate  he  would  have  to  hunt  up  some  village 
jeweler  who  could  test  and  weigh  them,  and  who,  though 
he  might  offer  to  give  him  a  clock  or  a  trinket,  or  to  repair 
his  watch  in  exchange,  would  hardly  have  the  commodities 
or  service  our  traveler  needed  at  his  disposal.  To  get 
what  he  wanted  for  what  he  had  to  give  without  recourse 
to  money  he  would  be  driven  to  all  sorts  of  intermediate 
exchanges. 

As  for  the  man  with  the  check-book,  or  check  or  bill  of 
exchange,  he  would  find  himself  the  worst  off  of  all.  He 
could  make  no  more  use  of  them  where  he  was  not  known 
than  of  so  much  blank  paper,  unless  he  found  some  one 
who  could  testify  to  his  good  credit  or  who  would  go  to 
the  expense  of  telegraphing  to  learn  it.  To  repeat  this  at 
every  stopping-place,  as  would  be  necessary  if  his  trip  were 
to  be  carried  through  as  it  had  been  begun,  would  be  too 
much  for  the  patience  and  endurance  of  an  ordinary  man. 

But  the  man  with  the  money  would  find  no  difficulty 
from  first  to  last.  Every  one  who  had  any  commodity  to 
exchange  or  service  to  render  would  take  his  money  gladly 
and  probably  say  "  Thank  you  "  on  receiving  it.  He  alone 
could  make  the  journey  he  set  out  to  make,  without  delay 
or  annoyance  or  loss  on  the  score  of  exchanges. 

What  we  may  conclude  from  this  little  imaginative 
experiment  is  not  that  of  all  things  money  is  the  most 
valuable  thing.  That,  though  many  people  have  in  a 
vague  way  accepted  it,  would  involve  a  fallacy  of  the 
same  kind  that  is  involved  in  the  assumption  that  a 
pound  of  lead  is  heavier  than  a  pound  of  feathers.  What 
we  may  safely  conclude  from  our  experiment  is,  that 
of  all  exchangeable  things  money  is  the  most  readily  ex- 
changeable, and  indeed  that  this  ready  exchangeability 
is  the  essential  characteristic  of  money. 


488  OF  MONEY.  Book  V. 

Yet  we  have  but  to  extend  our  illustration  so  as  to 
imagine  our  travelers  taking  with  them  beyond  this  country 
that  same  money  they  had  found  so  easily  exchangeable 
here,  to  see  that  money  is  not  one  substance,  nor  in  all 
times  and  places  the  same  substance. 

What  is  money  in  the  United  States  is  not  money  in 
England.  What  is  money  in  England  is  not  money  on  the 
Continent.  What  is  money  in  one  of  the  Continental 
states  may  not  be  money  in  another,  and  so  on.  Although 
in  places  in  each  country  much  resorted  to  by  travelers 
from  another  country,  the  money  of  the  two  countries 
may  circulate  together,  as  American  money  with  English 
money  in  Bermuda;  or  Canadian  money  with  American 
money  at  Niagara  Falls  j  or  Indian  money,  English  money, 
French  money  and  Egyptian  money  at  Port  Said ;  yet  the 
traveler  who  wishes  to  pass  beyond  such  monetary  borders 
with  what  will  readily  exchange  for  the  things  he  may 
need  must  provide  himself  with  the  money  of  the  country. 
The  money  that  has  served  him  in  the  country  he  has  left 
becomes  in  a  country  using  a  different  money  a  mere 
commodity  the  moment  he  leaves  the  monetary  border, 
which  he  will  find  it  advantageous  to  exchange  with  some 
dealer  in  such  commodities  for  money  of  the  country. 

Is  money  therefore  a  matter  of  mere  governmental 
regulation  ?  That  is  to  say,  can  governmental  statute  or 
fiat,  as  is  to-day  contended  by  many,  prescribe  what  money 
shall  be  used  and  at  what  rate  it  shall  pass  ? 

It  is  unnecessary  for  those  of  us  who  lived  in  or  visited 
California  between  the  years  1862  and  1879,  to  look  further 
than  our  own  country  and  time  to  see  that  it  cannot. 
During  those  years,  while  the  money  of  the  rest  of  the 
Union  was  a  more  or  less  depreciated  paper,  the  money  of 
that  State,  and  of  the  Pacific  coast  generally,  was  gold  and 
silver.  The  paper  money  of  the  general  government  was 
used  for  the  purchase  of  postage  stamps,  the  payment  of 


Chap.  II.         COMMON  UNDERSTANDING  OF  MONEY.         489 

internal  revenue  dues,  the  satisfaction  of  judgments  of  the 
Federal  courts,  and  of  those  of  the  State  courts  where 
there  was  no  specific  contract,  and  for  remittances  to  the 
East.  But  between  man  and  man,  and  in  ordinary  trans- 
actions, it  passed  only  as  a  commodity. 

If  it  be  said  that  governmental  power  was  not  fully 
exerted  in  this  case  j  that  the  United  States  government 
dishonored  its  own  currency  in  making  bonds  payable  and 
Custom-House  dues  receivable  only  in  gold,  and  that  the 
California  specific  contract  law  virtually  gave  the  recog- 
nition of  the  State  courts  only  to  gold  and  silver,  we  may 
turn  to  such  examples  as  that  of  the  Confederate  currency  ; 
as  that  of  the  Continental  currency ;  as  that  afforded  by 
Colonial  currencies  prior  to  the  Revolution  j  as  that  of  the 
French  assignats ;  or  to  that  comical  episode  in  which  the 
caustic  pen  of  Dean  Swift,  writing  under  an  assumed  name, 
balked  the  whole  power  of  the  British  government  in  its 
effort  to  induce  the  Irish  people  to  accept  what  was  really 
a  better  copper  money  than  that  they  were  using. 

Government  may  largely  affect  the  use  of  money,  as  it 
may  largely  affect  the  use  of  language.  It  may  enact 
what  money  shall  be  paid  out  and  received  by  government 
officials,  or  recognized  in  the  courts,  as  it  may  prescribe 
in  what  language  government  documents  shall  be  printed 
or  legislative  or  legal  proceedings  held,  or  scholars  in  the 
public  schools  be  taught.  But  it  can  no  more  prescribe 
what  shall  be  used  as  the  common  medium  of  exchange 
between  man  and  man  in  transactions  that  depend  on 
mutual  consent  than  it  can  prescribe  in  what  tongue 
mothers  shall  teach  their  babes  to  lisp.  In  all  the  many 
efforts  that  governments,  limited  or  absolute,  have  made 
to  do  this,  the  power  of  government  has  signally  failed. 

Shall  we  say  then,  as  do  many  who  point  out  this 
impotency  of  mere  government  fiat,  that  the  exchange 
value  of  any  money  depends  ultimately  upon  its  intrinsic 


490  OF  MONEY.  Book  V. 

value  ]  that  the  real  money  in  the  world,  the  only  true  and 
natural  money,  is  gold  and  silver,  one  or  both— for  the 
metal-moneyists  differ  as  to  this,  being  divided  into  two 
opposing  camps— the  monometallists  and  the  bimetallists  ? 

This  notion  is  even  more  widely  opposed  to  facts  than 
is  that  of  the  fiatists.  Gold  and  silver  have  for  the  longest 
time  and  over  the  widest  area  served,  and  yet  do  serve, 
as  material  for  money,  and  sometimes  have  served,  and  in 
some  places  yet  do  serve,  as  money.  This  was  the  case, 
to  some  extent,  in  the  early  days  of  the  California  diggings, 
when  every  merchant  or  hotel-keeper  or  gambler  or  bar- 
tender was  provided  with  a  bottle  of  acid  and  a  pair  of 
scales,  and  men  paid  for  goods  or  food  or  lodging  or 
drinks  or  losses  out  of  buckskin  bags  in  which  they  carried 
"gold  dust  or  nuggets.  This  is  to  some  extent  still  the  case 
in  some  parts  of  Asia,  where,  as  was  once  the  case  in  parts 
of  Europe,  even  gold  and  silver  coin  passes  by  weight. 
But  gold  and  silver  are  not  the  money  of  the  world.  The 
traveler  who  should  attempt  to  go  round  the  world  paying 
his  expenses  with  gold  and  silver  bullion  would  meet  the 
same  difficulty  or  something  like  the  same  difficulty  that 
he  would  meet  in  the  country  around  New  York.  Nor 
would  he  obviate  that  difficulty  by  taking  instead  of 
bullion,  gold  and  silver  coin.  Except  in  a  few  places,  such 
as  Bermuda  or  the  Hawaiian  Islands,  they  too  would 
become  commodities  not  easily  exchangeable  when  he  left 
the  United  States. 

The  truth  is  that  there  is  no  universal  money  and  never 
yet  has  been,  any  more  than  there  is  or  has  been  in  times 
of  which  we  have  knowledge  a  universal  language. 

As  for  intrinsic  value,  it  is  clear  that  our  paper  money, 
which  has  no  intrinsic  value,  performs  every  office  of 
money— is  in  every  sense  as  truly  money  as  our  coins, 
which  have  intrinsic  value  j  and  that  even  of  our  coins, 
their  circulating  or  money  value  has  for  the  most  part  no 


Chap.  II.        COMMON  UNDERSTANDING  OF  MONEY.         491 

more  relation  to  intrinsic  value  than  it  has  in  the  case  of 
our  paper  money.  And  this  is  the  case  to-day  all  over  the 
civilized  world. 

The  fact  is  that  neither  the  fiat  of  government  nor  the 
action  of  individuals  nor  the  character  or  intrinsic  value 
of  the  material  used,  nor  anything  else,  can  make  money 
or  mar  money,  raise  or  lessen  its  circulating  value,  except 
as  it  affects  the  disposition  to  receive  it  as  a  medium  of 
exchange. 

In  different  times  and  places  all  sorts  of  things  capable 
of  more  or  less  easy  transfer  have  been  used  as  money. 
Thus  in  San  Francisco  in  the  early  days,  when  the  sudden 
outflow  of  gold  from  the  mines  brought  a  sudden  demand 
for  money  which  there  was  no  ready  means  of  supplying^ 
bogus  coins,  known  to  be  bogus,  passed  from  hand  to 
hand  as  money ;  and  in  New  York  at  the  beginning  of  the 
Civil  War,  when  there  was  a  great  scarcity  of  circulating 
medium,  owing  to  the  withdrawal  of  gold  and  silver  from 
circulation,  postage  stamps,  car  tickets,  bread  tickets,  and 
even  counterfeit  notes,  known  to  be  counterfeit,  passed 
from  hand  to  hand  as  money. 

Shall  we  say  then  that  they  are  right  who  contend  that 
a  true  definition  of  money  must  include  everything  that 
can  be  used  in  exchange  to  the  avoidance  of  barter  ? 

Clearly,  we  cannot  say  this,  without  ignoring  a  real  and 
very  important  distinction— the  distinction  between  money 
and  credit.  For  a  little  consideration  will  show  that  the 
checks,  drafts,  negotiable  notes  and  other  transferable 
orders  and  obligations  which  so  largely  economize  the  use 
of  money  in  the  commercial  world  to-day,  do  so  only  when 
accompanied  by  something  else,  which  money  itself  does 
not  require.  That  something  else  is  trust  or  credit.  This 
is  the  essential  element  of  all  devices  and  instruments  for 
dispensing  with  the  medium  ship  of  money  without  resort 
to  barter.  It  is  only  by  virtue  of  it  that  they  can  take 


492  OF  MONEY.  Bool:  V. 

the  place  of  the  money  which  in  form  they  are  promises 
to  pay. 

When  I  give  money  for  what  I  have  bought,  I  pay  my 
debt.  The  transaction  is  complete.  But  I  do  not  pay  my 
debt  when  I  give  a  check  for  the  amount.  The  transaction 
is  not  complete.  I  merely  give  an  order  on  some  one  else 
to  pay  in  my  place.  If  he  does  not,  I  am  still  responsible 
in  morals  and  in  law.  As  a  matter  of  fact  no  one  will 
take  a  check  of  mine  unless  he  trusts  or  credits  me.  And 
though  an  honest  face,  good  clothes  and  a  manifest  ex- 
igency might  enable  me  to  pass  a  small  check  upon  one 
who  did  not  know  me,  without  the  guarantee  of  some  one 
he  did  know,  I  could  as  readily,  and  perhaps  more  readily, 
get  him  to  trust  me  outright.  So,  I  cannot,  except  to  one 
who  knows  me  or  to  whom  I  am  identified  as  a  man  of 
good  credit,  pass  the  check  of  another  or  his  note  or  draft 
or  bill  of  exchange  in  my  favor,  and  without  guaranteeing 
it  by  indorsement.  Even  then  I  do  not  make  a  payment ; 
I  merely  turn  over  with  my  own  guarantee  an  order  for 
payment. 

Thus  there  is  a  quality  attaching  to  money,  in  common 
apprehension,  which  clearly  distinguishes  it  from  all  forms 
of  credit.  It  is,  so  far  as  the  giver  of  the  money  is  con- 
cerned, a  final  closing  of  the  transaction.  The  man  who 
gives  a  check  or  bill  of  exchange  must  guarantee  its 
payment,  and  is  liable  if  it  be  not  paid  j  while  the  drawer 
on  the  other  hand  retains  the  power  at  any  time  of  stopping 
payment  before  that  has  been  actually  made.  Even  the 
man  who  gives  a  horse  or  other  commodity  in  exchange 
must,  save  as  to  certain  things  and  with  the  observance  of 
certain  requirements,  guarantee  title,  and  that  it  shall 
possess  certain  qualities  expressed  or  implied.  But  in  the 
passing  of  money  the  transaction  is  closed  and  finished, 
and  there  can  be  no  further  question  or  recourse.  For 


Chap.  II.         COMMON  UNDERSTANDING  OF  MONEY.         493 

money  is  properly  recognized  by  municipal  law  as  the 
common  medium  of  exchange. 

All  such  things  as  checks,  drafts,  notes,  etc.,  though  they 
largely  dispense  with  and  greatly  economize  the  use  of 
money,  do  so  by  utilizing  credit.  Credit  as  a  facilitator 
of  exchange  is  older  than  money  and  perhaps  is  even  now 
more  important  than  money,  though  it  may  be  made  into 
money,  as  gold  may  be  made  into  money.  But  though  it 
may  be  made  into  money,  it  is  not  in  itself  money,  any 
more  than  gold  of  itself  is  money,  and  cannot,  without 
confusion  as  to  the  nature  and  functions  of  money,  be 
included  as  money. 

What  then  shall  we  say  that  money  is  ? 

Evidently  the  essential  quality  of  money  is  not  in  its 
form  or  substance,  but  in  its  use. 

Its  use  being  not  that  of  being  consumed,  but  of  being 
continually  exchanged,  it  participates  in  and  facilitates 
other  exchanges  as  a  medium  or  flux,  serving  upon  a  larger 
scale  the  same  purpose  of  keeping  tally  and  facilitating 
transfers  as  is  served  by  the  chips  or  counters  often  used 
in  games  of  chance.* 

This  use  comes  from  a  common  or  usual  consent  or 
disposition  to  take  it  in  exchange,  not  as  representing 
or  promising  anything  else,  but  as  completing  the 
exchange. 

*  It  is  most  important  that  this  purely  representative  character 
of  money  should  be  thoroughly  understood  and  constantly  kept  in 
mind,  for  from  the  confusion  resulting  from  the  confounding  of 
money  with  wealth  have  flown  the  largest  and  most  pernicious  results. 
It  was  the  basis  of  that  anti-social  theory  of  international  exchanges 
which  has  cost  European  civilization  such  waste  of  labor  and  drain 
of  blood,  formerly  known  as  the  mercantile  system  and  which  sur- 
vives in  the  protectionism  of  to-day.  And  it  is  at  the  bottom  of 
those  theories  prevalent  in  the  United  States  to-day  which  seek  to 
increase  wealth  by  increasing  money. 


494  OF  MONEY.  Boole  V. 

The  only  question  any  one  asks  himself  in  taking  money 
in  exchange  is  whether  he  can,  in  the  same  way,  pass  it  on 
in  exchange.  If  there  is  no  doubt  of  that,  he  will  take  it  j 
for  the  only  use  he  has  for  money  is  to  pass  it  on  in 
exchange.  If  he  has  doubt  of  that,  he  will  take  it  only  at 
a  discount  proportioned  to  the  doubt,  or  not  take  it  at  all. 

What  then  makes  anything  money  is  the  common  con- 
sent or  disposition  to  accept  it  as  the  common  medium 
of  exchange.  If  a  thing  has  this  essential  quality  in  any 
place  and  time,  it  is  money  in  that  place  and  time,  no 
matter  what  other  quality  it  may  lack.  If  a  thing  lacks 
this  essential  quality  in  any  place  and  time,  it  is  not 
money  in  that  place  and  time,  no  matter  what  other  qual- 
ity it  may  have. 

To  define  money : 

Whatever  in  any  time  and  place  is  used  as  the  common 
medium  of  exchange  is  money  in  that  time  and  place. 

There  is  no  universal  money.  While  the  use  of  money 
is  almost  as  universal  as  the  use  of  languages,  and  it 
everywhere  follows  general  laws  as  does  the  use  of  lan- 
guages, yet  as  we  find  language  differing  in  time  and 
place,  so  do  we  find  money  differing.  In  fact,  as  we  shall 
see,  money  is  in  one  of  its  functions  a  kind  of  language 
—the  language  of  value. 


CHAPTER  III. 

MEDIUM  OF  EXCHANGE  AND  MEASURE 
OF  VALUE. 

SHOWING  HOW  THE  COMMON  MEDIUM  OF  EXCHANGE  BECOMES 
THE  COMMON  MEASURE  OF  VALUE,  AND  WHY  WE  CANNOT 
FIND  A  COMMON  MEASURE  IN  LABOR. 

Money  is  most  exchanged— Why  not  measure  value  by  labor? — 
Smith's  unsatisfactory  answer— The  true  answer— Labor  can 
afford  no  common  measure,  and  commodities  are  preferably  taken 
— Survivals  of  common  measures — Difference  in  common  measures 
does  not  prevent  exchange. 

I  HAVE  in  the  last  chapter  defined  money  as  whatever 
is  at  any  time  and  place  used  as  the  common  medium 
of  exchange.  This  is  indeed  the  primary  quality  of  money. 
But  proceeding  from  this  use  as  a  common  medium  of 
exchange,  money  has  another  and  closely  conjoined  use— 
that  of  serving  as  a  common  measure  of  value. 

The  reason  of  this  is  that  the  use  of  money  as  a  common 
medium  of  exchange,  which  causes  it  to  be  esteemed  for 
exchange  and  not  for  consumption,  makes  it  of  all 
exchangeable  things  that  which  in  civilized  societies  is 
often  and  most  commonly  exchanged.  A  given  portion 
of  wood  or  coal,  for  instance,  may  be  used  by  the  producer 
and  thus  not  be  exchanged  at  all  j  or  it  may  be  exchanged 
once  or  perhaps  even  half  a  dozen  times  between  cutting  or 
mining  and  its  reaching  in  the  hands  of  the  consumer  the 
ultimate  end  for  which  it  was  produced,  the  combustion 

495 


496  OF  MONEY.  Book  V. 

that  supplies  heat.  So  it  is  with  potatoes  or  wheat  or  corn. 
The  majority  of  horses  are  probably  not  exchanged  at 
all  during  their  working  days,  and  it  would  be  a  much 
exchanged  horse  who  should  have  six  owners  during  his 
life.  Cotton  and  wool  and  hemp  and  silk  may  pass  from 
one  to  half  a  dozen  exchanges  before  they  assume  the  form 
of  cloth  or  rope,  and  in  that  form  may  pass  through  from 
two  to  half  a  dozen  more  exchanges  before  reaching  the 
consumer.  And  so  with  lumber  or  iron  or  most  of  the 
forms  of  paper,  meat  or  leather.  Not  only  is  the  ultimate 
purpose  of  the  exchanges  of  such  things  destructive 
consumption,  but  they  are  mainly  composed  of  things 
which  if  not  soon  consumed  will  wear  out  or  decay. 

Money,  on  the  other  hand,  is  not  produced  for  the 
purpose  of  being  consumed,  but  for  the  purpose  of  being 
exchanged.  This,  not  consumption,  is  its  use.  And  we 
always  seek  for  its  substance  materials  least  subject  to 
wear  and  decay,  while  it  is  usually  carefully  guarded  by 
whoever  for  the  moment  may  be  in  its  possession.  And 
further  while  an  article  of  money  may  frequently  pass 
through  more  hands  in  a  single  day  than  ordinary  articles 
of  wealth  are  likely  to  pass  through  during  the  whole  period 
of  their  existence,  the  use  of  money  in  thought  and  speech 
as  a  symbol  of  value  brings  it  to  the  constant  notice  of 
those  who  do  not  often  tangibly  use  it.  Thus  it  is  that 
the  value  of  the  money  which  is  the  common  medium  of 
exchange  in  any  community  becomes  to  the  people  of  that 
community  better  known  than  the  value  of  anything  else, 
and  hence  is  most  readily  and  constantly  chosen  to  compare 
the  value  of  other  things. 

But  here  may  arise  a  question,  which  I  wish  thoroughly 
to  answer :  If,  as  explained  in  Book  II.,  value  is  in  itself 
a  relation  to  labor,  why  can  we  not  find  not  merely  a 
common  measure  of  value,  but  an  exact  and  final  measure 
of  value  in  labor  itself  ? 


Chap.  III.  FUNCTIONS  OF  MONEY.  497 

This  is  a  question  that  perplexes  a  great  many  of  the 
monetary  theories  that  have  been  broached  in  the  United 
States  without  finding  scholastic  recognition,  and  it  is 
raised  but  not  satisfactorily  answered  by  Adam  Smith. 

In  a  passage  previously  quoted  in  full*  Adam  Smith 
says :  "  But  though  labor  be  the  real  measure  of  the  ex- 
changeable value  of  all  commodities,  it  is  not  that  by  which 
their  value  is  commonly  estimated."  And  then  goes  on  to 
explain  the  reason  of  this. 

But  in  the  attempt  to  explain  this  fact  Adam  Smith  falls 
into  confusion  through  the  slipperiness  of  his  terms  and 
misses  the  true  reason.  While  he  says  in  effect  that  the 
time  of  exertion  will  not  measure  the  quality  of  exertion, 
he  yet,  almost  in  the  same  breath,  uses  time  as  the  measure 
of  exertion,  saying  that  "  every  commodity  is  ...  more 
frequently  exchanged  for  and  thereby  compared  with  other 
commodities  than  with  labor,"  that  "it  is  more  natural 
therefore  to  estimate  its  exchangeable  value  by  the  quantity 
of  some  other  commodity  than  by  that  of  the  labor  which 
it  can  purchase,"  and  that  "  the  greater  part  of  the  people 
too  understand  better  what  i>  meant  by  the  quantity  of  a 
particular  commodity  than  by  a  quantity  of  labor,"  thus 
ignoring  what  he  had  just  shown,  that  it  is  the  labor  (in 
the  sense  of  exertion)  that  their  possession  will  save  which 
determines  the  value  of  all  commodities.  His  attempted 
explanation  of  the  fact  that  the  real  measure  of  value  is 
not  the  common  measure  of  value,  amounts  to  nothing 
more  than  that  it  is  more  usual  to  measure  value  by 
commodities  than  by  labor.  This  is  no  explanation  of  the 
fact;  it  is  merely  a  statement  of  the  fact.  We  cannot 
explain  a  custom  or  habit  by  saying  that  it  is  natural  or 
showing  that  it  is  usual.  The  very  thing  to  be  explained 
is  why  it  seems  natural  and  has  become  usual. 

*  Page  231. 


498  OF  MONEY.  Book  V. 

Yet  in  the  light  of  our  previous  investigation  the  reason 
why  the  real  measure  of  value  cannot  serve  as  a  common 
measure  of  value  is  clear.  It  lies  in  the  human  constitution. 
We  become  conscious  of  exertion  through  the  "toil  and 
trouble  n  it  involves— the  feeling  of  effort  and  at  length  of 
irksomeness  and  repugnance  that  attends  its  continuance. 
Now  feeling  is  an  affection  or  condition  of  the  individual 
perception  or  Ego,  which  can  find  objective  manifestation 
only  through  action.  Even  the  mother  can  know  the 
feelings  of  the  babe  only  through  its  actions.  If  she  can 
tell  that  it  is  hungry  or  sleepy  or  in  pain,  or  is  satisfied 
and  happy,  it  is  only  in  this  way. 

As  we  have  seen,  labor  in  the  sense  of  exertion,  is  the 
true,  ultimate  and  universal  measure  of  value;  what 
anything  will  bring  in  exchange  being  always  based  upon 
an  estimate  of  the  toil  and  trouble  attendant  upon  the 
exertion  which  the  possession  of  that  thing  will  save. 

But  this  is  an  estimate  which,  though  each  may  make  it 
for  himself,  he  cannot  convey  to  another  directly,  since  the 
feeling  of  weariness  or  repugnance,  the  dislike  of  "toil 
and  trouble,"  which  constituting  the  resistance  to,  is  the 
measure  of,  exertion,  can,  in  our  normal  condition  at  least, 
be  conveyed  to,  or  expressed  by  one  to  another  only 
through  the  senses. 

We  make  such  estimates  continually  in  our  own  minds, 
for  memory  which  registers  the  experience  of  the  individual 
permits  us  to  compare  the  exertion  it  has  required  to  do 
or  procure  one  thing  with  what  it  has  required  to  do  or 
procure  another  thing.  But  to  express  to  another  person 
my  idea  of  the  amount  of  exertion  required  to  do  or  procure 
a  particular  thing  there  must  be  something  that  will  serve 
us  as  a  mutual  measure  of  the  resistance  to  exertion,  that 
is  to  say  the  "  toil  and  trouble  "  that  exertion  involves. 

Thus,  to  convey  to  one  ignorant  of  swimming  some  idea 
of  the  exertion  it  requires,  I  must  compare  it  with  some 


Chap.  IH.  FUNCTIONS  OF  MONEY.  499 

exertion  with  which  we  are  both  familiar,  such  as  walking. 
Or,  if  a  stranger  wishes  to  know  of  me  what  exertion  he 
will  have  to  make  to  walk  to  a  certain  point,  I  will  tell 
him,  if  I  know  it,  the  distance,  and  give  some  idea  of  the 
character  of  the  road,  for  he  will  have  some  idea  of  the 
exertion  required  to  walk  a  given  distance  on  an  ordinary 
road.  If  he  be  a  Frenchman  accustomed  to  meters  and 
kilometers,  which  neither  of  us  can  translate  into  feet  and 
miles,  I  will  still  be  able  to  convey  to  him  my  idea  by 
saying,  so  many  minutes'  or  hours'  walk,  for  all  men  have 
some  idea  of  the  exertion  required  to  walk  for  a  certain 
time.  If  we  could  find  no  common  nomenclature  of  time, 
I  could  still  give  him  some  idea  by  pointing  to  the  dial  of 
my  watch  or  to  the  sun,  or  by  finding  from  whence  he  had 
come,  and  making  him  understand  that  the  distance  he 
had  yet  to  go  was  longer  or  shorter,  and  the  road  harder 
or  easier.  But  there  must  be  some  point  of  mutual 
knowledge  which  will  furnish  us  with  a  common  measure, 
for  me  to  make  myself  intelligible  to  him  at  all. 

So  reversely,  a  common  experience  of  required  exertion 
will,  in  the  absence  of  a  more  exact  measure,  give  some 
idea  of  distance  or  area,  as 

A  bowshot  from  her  bower  eaves, 
He  rode  between  the  barley  sheaves, 
or, 

They  gave  him  of  the  corn-land 

That  was  of  public  right, 
As  much  as  two  strong  oxen 

Could  plow  from  morn  to  night. 

Now  while  exertion  is  always  the  real  measure  of  value, 
to  which  all  common  measures  of  value  must  refer,  yet  to 
get  a  common  measure  of  value,  which  will  enable  us  to 
express  from  one  to  another  both  quantity  and  quality 
(duration  and  intensity)  of  exertion,  we  must  take  some 


500  OF  MONEY.  Boole  V. 

result  of  exertion,  just  as  to  find  a  common  measure  of 
heat,  light,  expansive  force  or  gravitation  we  must  take 
some  tangible  manifestation  of  those  forms  of  energy.  It 
is  because  commodities,  being  the  results  of  exertion,  are 
tangible  manifestations  of  exertion  that  they  are  generally 
and  naturally  used  as  common  measures  of  value. 

Even  where  exertion  is  expressed  in  time,  there  is  always 
at  least  an  implied  reference  to  accomplishment  or  results. 
Where  I  hire  a  man  to  work  for  me  by  the  day  or  week 
or  month  in  occupations  which  show  tangible  result,  as  in 
digging  or  draining,  in  plowing  or  harvesting,  in  felling 
trees  or  chopping  wood,  it  is  always  with  a  certain  idea  of 
the  tangible  result  to  be  achieved,  or  in  other  words,  of 
the  intensity  as  well  as  of  the  duration  of  the  exertion. 
If  I  find  no  result,  I  say  that  no  work  has  been  done ;  and 
if  I  find  that  the  results  are  not  such  as  should  have  come 
from  a  reasonable  or  customary  intensity  of  exertion  with 
a  reasonable  or  customary  knowledge  or  skill,  I  say  that 
what  I  really  agreed  to  pay  for  has  not  been  accorded  me. 
And  disinterested  men  would  support  me. 

On  going  ashore  in  San  Francisco,  a  shipmate  of  mine, 
who  could  not  tell  a  scythe  from  a  marlinspike,  hired  out 
to  a  farmer  in  haying-time  for  $5  a  day.  At  his  first 
stroke  with  the  scythe  he  ran  it  so  deep  in  the  ground 
that  he  nearly  broke  it  in  getting  it  out.  Though  he 
indignantly  denounced  such  antiquated  tools  as  out  of 
fashion,  declaring  that  he  was  used  to  "  the  patent  scythes 
that  turn  up  at  the  end,"  he  did  not  really  feel  wronged 
that  the  farmer  would  not  pay  him  a  cent,  as  he  knew  that 
the  agreement  for  day's  labor  was  really  an  agreement 
for  so  much  mowing. 

In  fact,  the  form  of  measuring  exertion  by  time,  at 
bottom,  involves  its  measurement  by  result. 

This  we  find  to  be  true  even  where  there  is  no  definite 
result.  If  I  hire  a  boatman  or  cabman  to  take  me  to  a 


Chap.  III.  FUNCTIONS  OF  MONEY.  501 

certain  point,  the  distance,  being  known,  affords  a  close 
idea  of  the  exertion  required,  and  it  is  the  fairest,  and  to 
both  parties  usually  the  most  agreeable  way,  that  the 
stipulation  shall  be  for  that  result,  or  as  the  cabmen  in 
Europe  say  "  by  course  ? "  which  is  a  definite  payment  for 
a  definite  result.  But  even  were  I  to  take  a  boat  or  a  cab 
without  fixed  idea  of  where  I  want  to  go,  and  agree  to  pay 
by  the  hour,  there  is  an  implied  understanding  as  to  the 
intensity  of  the  exertion  for  which  I  am  to  pay.  Either 
boatman  or  cabman  would  feel  that  he  was  not  keeping 
his  agreement  fairly,  and  I  would  certainly  feel  so,  were 
he,  for  the  purpose  of  "  putting  in  time,"  to  row  or  drive 
at  a  snail's  pace. 

So  strong  is  the  disposition  to  take  tangible  results  as 
the  measure  of  exertion  that  even  where  quality  is  of  more 
importance  than  quantity,  as  in  literary  work,  the  formal 
measurement  is  even  in  our  best  magazines  and  newspapers 
by  the  page  or  column,  differences  in  quality,  real  or 
expected,  being  recognized  partly  in  the  readiness  with 
which  an  article  is  accepted,  and  partly  in  a  greater  price 
per  page  or  per  column. 

In  short,  while  exertion,  including  both  quantity  and 
intensity,  is  always  the  true  and  final  measure  of  value,  it 
is  only  through  the  manifestations  of  exertion  that  any 
common  measure  of  value  can  be  had.  Thus  commodities 
being  tangible  expressions  of  exertion  become  the  readiest 
common  measures  of  value,  and  have  since  the  beginning 
of  human  society  been  so  used. 

While  any  commodity,  or  for  that  matter  any  definite 
service,  may  be  used  as  a  common  measure  of  value  to  the 
extent  to  which  it  is  recognized  as  embodying  or  express- 
ing a  certain  amount  of  exertion  and  thus  having  a  def- 
inite, though  not  necessarily  a  fixed  value,  the  tendency 
is  always  to  use  for  this  purpose  the  commodity  whose 
value  is  most  generally  and  easily  recognized.  And  since 


502  OF  MONEY.  Book  V. 

the  commodity  which  is  used  as  the  common  medium  of 
exchanges  becomes  in  that  use  the  commodity  which  is 
of  tenest  exchanged  and  whose  value  is  most  generally  and 
easily  recognized,  whatever  serves  as  the  common  medium 
of  exchange  tends  in  that  to  become  the  common  measure 
of  value,  in  terms  of  which  the  values  of  other  things  are 
expressed  and  compared.  In  societies  which  have  reached 
a  certain  stage  of  civilization  this  is  always  money.  Hence 
we  may  define  money  with  regard  to  its  functions  as  that 
which  in  any  time  and  place  serves  as  the  common  medium 
of  exchange  and  the  common  measure  of  value. 

It  must  be  remembered,  however,  that  of  these  two 
functions,  use  as  the  common  medium  of  exchange  is 
primary.  That  is  to  say,  use  as  the  common  medium  of 
exchange  brings  about  use  as  the  common  measure  of 
value,  and  not  the  reverse.  But  these  two  uses  do  not 
always  exactly  correspond. 

Thus,  in  New  York  and  its  neighborhood  one  may  still 
hear  of  shillings  or  York  shillings  (12J  cents)  as  a  measure 
of  small  values.  There  is  no  such  coin,  this  use  of  an 
ideal  shilling  being  a  survival  from  Colonial  times.  So, 
in  Philadelphia  one  may  hear  of  fips  and  levies ;  in  New 
Orleans  of  picayunes  and  in  San  Francisco  of  bits,  sur- 
vivals of  the  Spanish  coinage ;  and  in  the  far  Northwest  of 
"  skins,"  a  purely  ideal  measure  of  value  surviving  from 
the  time  when  the  Hudson  Bay  Company  bartered  with 
the  Indians  for  furs.  During,  and  for  some  time  after,  the 
civil  war  two  different  common  measures  of  value  were  in 
co-temporaneous  use  in  the  United  States— paper  money 
and  gold.  But  since  the  resumption  of  specie  payments, 
though  paper  money  still  constitutes  the  more  largely  used 
medium  of  exchange,  gold  alone  has  in  this  country 
become  the  common  measure  of  value.  And  though  gold, 
silver  and  paper  are  all  largely,  and  generally  co-tempora- 
neously,  used  throughout  the  civilized  world  to-day  as 


Chap.  III.  FUNCTIONS  OF  MONEY.  503 

supplying  the  common  medium  of  exchange,  the  great 
monetary  division  is  between  the  countries  which  use  gold 
as  the  common  measure  of  value  and  the  countries  which 
use  silver. 

But  it  is  still  evident,  as  Adam  Smith  said,  that  labor 
(in  the  sense  of  exertion)  is  "the  real  measure  of  the 
exchangeable  value  of  all  commodities,"— "the  only 
universal  as  well  as  the  only  accurate  measure  of  value,  or 
the  only  standard  by  which  we  can  compare  the  values  of 
all  commodities  in  all  times  and  in  all  places."  For  it  is 
still  true,  as  he  said,  that  "the  real  price  of  everything, 
what  everything  really  costs  to  the  man  who  wants  to 
acquire  it,  is  the  toil  and  trouble  of  acquiring  it.  What 
everything  is  really  worth  to  the  man  who  has  acquired  it, 
and  who  wants  to  dispose  of  it  or  exchange  it  for  something 
else,  is  the  toil  and  trouble  which  it  can  save  to  himself, 
and  which  it  can  impose  upon  other  people." 

Since  labor  is  thus  the  real  and  universal  measure  of 
value,  whatever  any  country  may  use  as  the  common 
measure  of  value  can  impose  little  difficulty  upon  the 
exchanges  of  its  people  with  the  people  of  other  countries 
using  other  common  measures  of  value.  Nor  yet  would 
any  change  within  a  country  from  one  common  measure 
of  value  to  another  common  measure  of  value  bring  more 
than  slight  disturbance  were  it  not  for  the  effect  upon 
credits  or  obligations.  In  this  lies  the  main  source  of 
the  controversies  and  confusions  with  which  the  "  money 
question  "  is  now  beset. 

Before  going  further  it  would  therefore  be  well,  at  least 
so  far  as  pertains  to  the  idea  of  money,  to  examine  the 
relations  of  credit  to  exchange. 


OF  TB2B 

UNIVERSITY 


CHAPTER    IV. 

THE  OFFICE  OF   CREDIT  IN  EXCHANGES. 

[SHOWING  THAT  THE  ADVANCE  OF  CIVILIZATION  ECONOMIZES 
THE  USE  OF  MONEY. 

Tendency  to  over-estimate  the  importance  of  money — Credit  existed 
before  the  use  of  money  began,  and  it  is  now  and  always  has  been 
the  most  important  instrument  of  exchange — Illustration  of  ship- 
wrecked men— Adam  Smith's  error  as  to  barter— Money's  most 
important  use  to-day  is  as  a  measure  of  value.] l 

I  HAVE  sought  to  explain  the  common  understanding 
of  money  and  the  part  that  it  plays  in  exchanges  by 
supposing  a  number  of  travelers.  I  did  so  because  it  is  in 
such  small  and  immediate  exchanges  as  a  traveler  must 
make  among  strangers  that  the  peculiar  usefulness  of 
money  is  most  clearly  felt.  I  did  not  mean  to  assume  that 
the  difficulties  of  barter  in  all  places  and  times  are  so  great 
as  those  that  in  the  vicinity  of  New  York  at  the  close  of 
the  Nineteenth  Century  would  attend  the  effort  of  a  traveler 
to  supply  his  personal  needs  by  that  means  of  exchange. 

On  the  contrary  there  are  even  now  parts  of  the  world 
where  a  traveler  might  find  a  properly  selected  stock  of 
commodities  more  readily  and  advantageously  exchange- 
able than  money  itself,  and  the  difficulties  of  barter  have 
certainly  increased  not  merely  with  the  greater  use  of 
money,  but  with  such  modern  appliances  as  post-offices, 

i  Heading  not  complete  in  MS.    See  Prefatory  Note. — H.  G.,  JR. 
504 


CJiap.  IV.          OFFICE  OF  CREDIT  IN  EXCHANGES.          505 

steamboats,  railways,  telegraphs  and  telephones,  and  with 
the  greater  concentration  of  population  and  exchanges 
that  result  from  them.  Even  in  our  own  civilization  barter 
must  have  been  a  more  efficient  means  of  exchange  in  the 
times  that  preceded  the  great  industrial  development  of 
the  Nineteenth  Century  than  it  is  now  because  people  were 
more  generally  accustomed  to  it.  The  old  traveling 
merchants  and  even  the  old  foreign  merchants,  who  sent 
their  ships  over  the  maritime  world,  were  largely  barterers, 
and  the  stated  fairs  of  which  we  have  now  only  faint 
survivals,  but  which  formed  so  important  a  part  in  the 
industrial  life  of  our  ancestors,  gave  place  and  occasion  for 
the  meeting  of  those  who  wished  to  make  a  direct  exchange 
of  commodities  for  commodities  or  services  for  services 
that  are  wanting  now. 

The  effect  of  the  general  adoption  of  the  more  elaborate 
and  on  a  large  scale  more  efficient  methods  of  an  advanced 
civilization  is  always  to  relegate  to  forgetfulness  the 
simpler  methods  previously  in  use.  We  have  become 
within  a  few  years  so  accustomed  to  the  electric  telegraph 
that  we  are  apt  to  think  that  without  it  men  would  be 
reduced  in  carrying  messages  to  the  means  of  transporta- 
tion by  land  or  water,  and  to  forget  that  telegraphs  were 
in  use  before  electric  telegraphing  was  dreamed  of.  The 
convenience  of  the  lucifer  match  has  made  its  use  so 
universal,  that  most  of  us  if  thrown  on  our  own  resources 
without  matches,  would  find  it  a  most  serious  difficulty  to 
light  a  pipe  or  make  a  fire.  A  hunting  party  of  civilized 
men,  if  deprived  by  accident  of  their  ammunition,  might 
starve  to  death  before  they  could  kill  game  even  where  it 
was  abundant.  Yet  at  the  beginning  of  this  century  lucifer 
matches  were  unknown,  and  men  killed  game  before  fire- 
arms were  invented. 

And  so  it  is  with  money.  Its  use  is  so  general  in  our 
high  civilization  and  its  importance  so  great  that  we  are 


506  OF  MONEY.  BooJc  V. 

apt  to  over-estimate  that  importance  and  to  forget  that 
men  lived  and  advanced  before  money  was  developed,  and 
both  to  underrate  the  efficiency  of  the  means  of  exchange 
other  than  that  of  money,  and  the  amount  of  exchanging 
that  even  now  goes  on  without  any  more  use  of  money 
than  that  of  a  counter  or  denominator  of  values. 

It  is  not  only  that  the  simplest  form  of  exchange,  the 
transfer  of  things  desired  in  themselves  for  things  desired 
in  themselves,  still  to  some  extent  continues;  but  the 
advance  of  civilization  which  in  an  early  stage  develops 
the  use  of  money  as  a  medium  of  exchange  begins  in  later 
stages  to  develop  means  for  dispensing  with  or  much 
economizing  this  use  of  money.  The  exchanges  between 
different  countries  are  still  carried  on  without  the  use  of 
money,  and  so  in  great  measure  are  domestic  exchanges, 
even  in  the  same  locality.  Not  merely  in  the  rural  districts 
and  in  small  transactions  is  there  much  exchanging  with- 
out actual  transfer  of  money,  but  in  the  greatest  cities,  the 
largest  transactions,  habitually  spoken  of  and  thought  of 
as  though  they  involved  the  transfer  of  money,  really  take 
place  without  it.  The  richer  people  in  fact  use  compara- 
tively little  money,  even  in  personal  transactions,  and  I 
fancy  that  a  man  of  good  credit  who  kept  a  bank-account 
might,  if  he  tried  to,  live  from  year's  end  to  year's  end, 
even  in  a  great  city  like  New  York  (and  with  less  effort  in 
a  smaller  place),  without  a  penny  of  actual  money  passing 
through  his  hands.  His  income,  if  not  received  in  small 
amounts,  he  would  get  in  checks  or  similar  transfers.  His 
larger  expenses  he  could  of  course  pay  for  in  checks,  and 
even  such  things  as  newspapers,  tickets  for  street-car  lines 
or  railways,  or  admission  to  theaters,  postage-stamps,  etc., 
he  could  with  a  little  effort  get  in  the  same  way. 

Now  all  this  economizing  in  the  use  of  money,  which 
we  are  accustomed  to  think  of  as,  and  indeed  in  some  of 
its  forms  really  is,  the  latest  development  of  a  civilization 


Chap.  IV.          OFFICE  OF  CREDIT  IN  EXCHANGES.          607 

that  for  immemorial  ages  lias  been  accustomed  to  the  use 
of  money,  is  really  in  essence  a  return  to  something  that 
must  have  been  in  use  for  the  facilitating  of  exchanges 
before  money  was  developed  among  men.  That  something 
is  what  we  call  trust  or  credit.  Credit  is  to-day  and  in  our 
highest  civilization  the  most  important  instrument  of 
exchange ;  and  that  it  must  have  been  from  the  very  first 
appearance  of  man  on  this  globe  the  most  important 
instrument  of  exchange,  any  one  can  see,  if  he  will  only 
discard  the  assumption  that  invalidates  so  much  of  our 
recent  philosophy  and  philosophic  history— the  assump- 
tion that  the  progress  of  civilization  is  a  change  in  man 
himself —and  allow  even  prehistoric  man  the  same  reason- 
ing faculties  that  all  we  know  of  man  in  historic  times 
shows  to  belong  to  him  as  man. 

Imagine  a  number  of  totally  shipwrecked  men  swimming 
ashore  in  their  buffs  to  an  uninhabited  island  in  a  climate 
genial  enough  to  enable  them  to  support  life.  What  would 
be  their  first  exchanges  ?  Would  they  not  be  based  upon 
the  various  forms  of  the  proposition,  "I  will  do  or  get 
this  for  you,  if  you  will  do  or  get  that  for  me  ? n  Now,  no 
matter  where  or  how  they  got  into  this  world,  this  must 
have  been  the  position  of  the  first  men  when  they  got  here, 
and  all  that  we  can  reason  from  with  any  certainty  goes 
to  show  that  these  first  men  must  have  been  essentially 
the  same  kind  of  men  as  we  ourselves. 

If  there  is  any  difference  in  priority  between  them, 
credit  must,  in  the  nature  of  things,  have  preceded  barter 
as  an  instrument  of  exchange,  and  must  at  least  from  the 
very  first  have  assisted  barter.  What  more  natural  than 
that  the  man  who  had  killed  a  deer,  or  made  a  large  catch 
of  fish,  should  be  willing  to  give  now  while  he  had  abun- 
dance in  return  for  a  promise  expressed  or  implied  that 
his  neighbor  when  similarly  fortunate  would  in  the  same 
way  rem  ember  him  ?  The  organization  of  credit  into  more 


508  OF  MONEY.  Boole  V. 

elaborate  and  finer  forms  goes  on  with  the  development 
of  civilization,  but  credit  must  have  begun  to  aid  exchanges 
with  the  very  beginnings  of  human  society,  and  it  is  in 
the  backwoods  and  new  settlements  rather  than  in  the 
great  cities  that  we  will  to-day  find  its  direct  forms  playing 
relatively  the  most  important  part  in  exchanges. 

In  explaining  the  origin  and  use  of  money,  Adam  Smith 
much  overrated  the  difficulties  of  barter,  and  in  this  he 
has  been  followed  by  nearly  all  the  writers  who  have 
succeeded  him.  Of  the  condition  before  the  use  of  the 
metals  as  money  he  says  (Book  I.,  Chapter  IV.  of  the 
"Wealth  of  Nations"): 

One  man,  we  shall  suppose,  has  more  of  a  certain  commodity  than 
he  himself  has  occasion  for,  while  another  has  less.  The  former 
consequently  would  be  glad  to  dispose  of,  and  the  latter  to  purchase, 
a  part  of  this  superfluity.  But,  if  this  latter  should  chance  to  have 
nothing  that  the  former  stands  in  need  of,  no  exchange  can  be  made 
between  them.  The  butcher  has  more  meat  in  his  shop  than  he  him- 
self can  consume,  and  the  brewer  and  the  baker  would  each  of  them 
be  willing  to  purchase  a  part  of  it.  But  they  have  nothing  to  offer 
in  exchange,  except  the  different  productions  of  their  respective 
trades,  and  the  butcher  is  already  provided  with  all  the  bread  and 
beer  which  he  has  immediate  occasion  for.  No  exchange  can,  in  this 
case,  be  made  between  them.  He  cannot  be  their  merchant,  nor  they 
his  customers ;  and  they  are  all  of  them  thus  mutually  less  service- 
able to  one  another.  .  .  . 

.  .  .  The  man  who  wanted  to  buy  salt,  for  example,  and  had  noth- 
ing but  cattle  to  give  in  exchange  for  it,  must  have  been  obliged  to  buy 
salt  to  the  value  of  a  whole  ox,  or  a  whole  sheep,  at  a  time.  He  could 
seldom  buy  less  than  this,  because  what  he  was  to  give  for  it  could 
seldom  be  divided  without  loss ;  and  if  he  had  a  mind  to  buy  more, 
he  must,  for  the  same  reasons,  have  been  obliged  to  buy  double  or 
triple  the  quantity,  the  value,  to  wit,  of  two  or  three  oxen,  or  of  two 
or  three  sheep.  If,  on  the  contrary,  instead  of  sheep  or  oxen,  he  had 
metals  to  give  in  exchange  for  it,  he  could  easily  proportion  the 
quantity  of  the  metal  to  the  precise  quantity  of  the  commodity  which 
he  had  immediate  occasion  for. 

Though  this  explanation  of  the  difficulties  attending 
barter  has  been  paraphrased  by  writer  after  writer  since 


C1iap.IV.          OFFICE  OF  CREDIT  IN  EXCHANGES.          509 

Adam  Smith,  it  is  an  exaggeration  so  gross  as  co  be 
ridiculous.  The  differentiation  of  such  trades  as  that  of 
the  butcher,  brewer  and  baker,  the  fact  that  men  habitually 
devote  their  labor  to  the  production  of  more  of  certain 
commodities  than  they  themselves  can  consume,  implies  a 
division  of  labor  that  could  not  possibly  take  place  were 
exchange  impossible  under  the  circumstances  that  Adam 
Smith  assumes.  And  it  is  evident  that  such  circumstances 
would  impose  no  insuperable  difficulty  to  exchange  even 
though  a  true  money  had  not  yet  come  into  use.  The 
butcher,  with  meat  that  he  wanted  to  dispose  of,  would 
not  have  refused  the  exchange  offered  by  the  brewer  and 
baker  because  he  himself  was  already  provided  with  all 
the  bread  and  beer  that  he  had  immediate  occasion  for. 
On  the  contrary,  he  would  say,  "  I  have  no  immediate  use 
for  bread  and  beer  because  I  am  already  supplied,  but  I 
will  give  you  the  meat  you  want  on  your  promise  to  give 
me  its  equivalent  in  bread  and  beer  when  I  call  for  them." 
Nor  need  he  necessarily  wait  for  his  own  supply  of  bread 
and  beer  to  be  exhausted  before  calling  on  the  baker  and 
brewer  for  the  fulfilment  of  their  promises,  for  since  man's 
wants  are  not  satisfied  with  meat,  bread  and  beer  alone, 
he  might  want  from  the  tailor  a  coat,  from  the  grazier  a 
bullock,  from  the  carpenter  a  house  j  and  since  they  could 
not  take  from  him  at  once  full  payment  in  such  a 
perishable  commodity  as  meat,  he  could  help  out  his  part 
of  the  exchange  by  telling  the  baker  and  brewer  to  give 
to  them  the  bread  and  beer  they  had  promised  him. 

That  is  to  say,  it  is  not  necessary  to  an  exchange  that 
both  sides  of  it  shall  be  effected  at  once  or  with  the  same 
person.  One  part  or  side  of  the  full  exchange  may  be 
effected  at  once,  and  the  effecting  of  the  other  part  or  side 
may  be  deferred  to  a  future  time  and  transferred  to 
another  person  or  persons  by  means  of  trust  or  credit. 
And  by  this  simple  and  natural  device,  and  without  the 
intervention  of  money,  salt  could  be  exchanged  for  less 


510  OF  MONEY.  Book  V. 

quantities  of  beef  or  mutton  than  are  likely  to  spoil  before 
a  single  family  could  consume  them.  The  truth  is  that 
the  difficulties  of  incidence  which  Adam  Smith  speaks  of 
here  as  if  they  were  inseparable  from  barter  are  always 
avoided  by  the  use  of  trust  where  trust  is  possible.  It  is 
only  where  there  are  no  other  exchanges  going  on  and  it 
is  not  probable  that  the  parties  concerned  will  come  into 
contact  directly  or  indirectly  again,  as  in  a  desert  or  at 
sea,  that  owing  to  want  of  incidence  no  exchange  can  be 
made  between  them.* 

It  is  really  in  exchange  between  those  who  are  unknown 
to  each  other  and  do  not  expect  to  meet  each  other  again 
that  money  performs  its  most  indispensable  office  (as 
illustrated  in  Book  V.,  Chapter  II.).  The  use  of  money,  by 
which  the  traveler  can  easily  carry  with  him  the  means  of 
supplying  his  needs,  has  greatly  facilitated  traveling ;  yet 
in  the  bill  of  exchange,  the  letter  of  credit,  Cook's  coupons, 
and  the  book  of  certified  checks,  which  are  so  largely 
displacing  money  for  the  use  of  travelers,  we  come  back 
again  to  the  use  of  trust. 

Trust  or  credit  is  indeed  the  first  of  all  the  instrumen- 
talities that  facilitate  exchange.  Its  use  antedates  not 
merely  the  use  of  any  true  money,  but  must  have  been 

*  But  even  here  there  is  often  something  of  the  nature  of  exchange, 
although  it  may  lack  the  element  of  certainty.  When  a  boy,  passing 
through  a  street  in  Philadelphia  during  a  sudden  rain,  I  met  a  gen- 
tleman standing  in  a  doorway  and  proffered  him  the  shelter  of  my 
umbrella,  going  a  little  out  of  my  way  to  take  him  to  his  destination. 
As  we  parted  he  said,  "  You  and  I  are  not  likely  to  meet  again,  as  I 
am  a  stranger  here ;  but  one  good  turn  deserves  another,  and  I  will 
try  to  return  your  service  to  me  by  doing  such  a  service  for  some  one 
else,  telling  him  to  pass  it  along."  Possibly  that  little  kindly  service, 
which  I  would  have  forgotten  but  for  the  impression  his  words  made, 
maybe  "passing  along"  still.  Both  good  and  evil  pass  on  as  waves 
pass  on.  Yet  I  cannot  but  think  that  in  the  long  run,  good  outlives 
evil.  For  as  to  the  normal  constitution  of  the  human  mind,  evil  must 
bring  the  wider  and  more  permanent  pain,  the  impulse  to  its  per- 
petuation must  meet  the  greater  friction. 


Chap.  IV.          OFFICE  OF  CREDIT  IN  EXCHANGES.          611 

coeval  with  the  first  appearance  of  man.  Truth,  love,  sym- 
pathy are  of  human  nature.  It  is  not  only  that  without 
them  man  could  never  have  emerged  from  the  savage  state, 
but  that  without  them  he  could  not  have  maintained  him- 
self even  in  a  savage  state.  If  brought  on  earth  without 
them,  he  would  inevitably  have  been  exterminated  by  his 
animal  neighbors  or  have  exterminated  himself. 

Men  do  not  have  to  be  taught  to  trust  each  other,  except 
where  they  have  been  deceived,  and  it  is  more  often  in  our 
one-sided  civilization,  where  laws  for  the  collection  of 
debts  have  weakened  the  moral  sanction  which  public 
opinion  naturally  gives  to  honesty,  and  a  deep  social 
injustice  brings  about  a  monstrous  inequality  in  the 
distribution  of  wealth,  and  not  among  primitive  peoples, 
that  the  bond  is  of  tenest  required  to  back  the  simple  word. 
So  natural  is  it  for  men  to  trust  each  other  that  even  the 
most  distrustful  must  constantly  trust  others. 

And  trust  or  credit  is  not  merely  the  first  of  the  agencies 
of  exchange  in  the  sense  of  priority ;  it  yet  is,  as  it  always 
has  been,  the  first  in  importance.  In  spite  of  our  extensive 
use  of  money  in  effecting  exchanges,  what  is  accomplished 
by  it  is  small  as  compared  with  what  is  accomplished  by 
credit.  In  international  exchanges  money  is  not  used  at 
all,  while  the  great  volume  of  domestic  exchange  is  in 
every  civilized  country  carried  on  by  the  giving  and 
cancelation  of  credits.  As  a  matter  of  fact  the  most 
important  use  of  money  to-day  is  not  as  a  medium  of 
exchange,  though  that  is  its  primary  use.  It  is  that  of  a 
common  measure  of  value,  its  secondary  use.  Not  only 
this,  but  with  the  advance  in  civilization  the  tendency  is 
to  make  use  of  credit  as  money ;  to  coin,  as  it  were,  trust 
into  currency,  and  thus  to  bring  into  use  a  medium  of 
exchange  better  adapted  in  many  circumstances  to  easy 
tran  sf  er  than  metallic  money.  The  paper  money  so  largely 
in  use  in  all  civilized  countries  as  a  common  medium  of 
exchange  is  in  reality  a  coinage  of  credit  or  trust. 


CHAPTER  V. 

THE  GENESIS  OF  MONEY. 

[SHOWING  THAT  THE  LAW  OF  GRATIFYING  DESIRES  WITH 
THE  LEAST  EXERTION  PROMPTS  THE  USE  FROM  TIME  TO 
TIME  OF  THE  MOST  LABOR-SAVING  MEDIUM  AVAILABLE. 

Money  not  an  invention,  but  developed  by  civilization— It  grows  with 
the  growth  of  exchanges — Exchange  first  of  general  commodities 
—Then  of  the  more  convenient  commodities— Then  of  coin,  whose 
commodity  value  comes  to  be  forgotten — Illustration  of  the  Ameri- 
can trade  dollar— The  lessening  uses  of  commodity  money  and 
extensions  of  credit  money— Two  elements  in  exchange  value  of 
metal  coin :  intrinsic,  or  value  of  the  metal  itself,  and  seigniorage — 
Meaning  of  seigniorage — Exchange  value  of  paper  money  is  seign- 
iorage— Use  of  money  not  for  consumption,  but  exchange — Propri- 
etary articles  as  mediums  of  exchange — Mutilated  coins — Debased 
coinage — When  lessening  metal  value  in  coins  does  not  lessen 
circulating  value— This  the  reason  why  paper  money  exchanges 
equally  with  metal  money  of  like  denomination.]  l 

MONEY  is  not  an  invention,  but  rather  a  natural 
growth  or  development,  arising  in  the  progress 
of  civilization  from  common  perceptions  and  common 
needs.  The  same  fundamental  law  of  human  nature  which 
prompts  to  exchange,  the  law  by  which  we  seek  to  satisfy 
our  desires  with  the  least  exertion,  prompts  us  with  the 
growth  of  exchanges  to  adopt  as  a  medium  for  them  the 
most  labor-saving  instruments  available. 

i  The  part  of  chapter  heading  within  brackets  not  in  MS.  —  H.G.,  JR. 
512 


Chap.  V.  THE  GENESIS  OF  MONEY.  513 

All  exchange  is  of  services  or  commodities.  But  as 
commodities  are  in  reality  concrete  services  they  afford 
from  the  first  the  readiest  media  of  exchange,  performing 
that  office  and  serving  as  measures  of  value  not  only  for 
other  commodities  but  for  direct  services. 

But  commodities  (under  which  name  we  include  all 
movable  products  of  labor,  which,  as  such,  have  value  so 
long  as  they  retain  the  capacity  of  ministering  to  desire) 
greatly  differ  in  their  availability  as  media  of  exchange. 
Those  best  fitted  for  that  use  are  those  which  are  least 
perishable,  which  can  be  most  easily  passed  from  hand  to 
hand  and  moved  from  place  to  place;  which  are  most 
uniform  in  their  articles  and  most  homogeneous  in  their 
structure,  so  that  they  may  be  estimated  with  most  cer- 
tainty and  divided  and  reunited  with  the  least  waste,  and 
whose  value  is  from  their  general  use  best  known  and 
most  quickly  recognized. 

In  proportion  as  these  qualities  are  united  in  one  com- 
modity there  is  a  natural  tendency  to  its  use  as  a  medium 
for  the  exchange  of  other  things,  and  this  use  tends  again 
to  the  wider  knowledge  and  quicker  recognition  of  its  value. 

In  primitive  societies,  or  in  the  outposts  of  civilization 
where  better  means  were  not  readily  obtainable,  skins, 
shells,  salt,  beads,  tobacco,  tea,  blankets,  and  many  other 
of  the  less  perishable  and  more  portable  commodities,  have 
in  an  imperfect  way  and  to  a  limited  extent  been  used  as 
common  media  of  exchange  and  common  measures  of  value, 
thus  becoming  the  money  of  the  time  and  place.*  But 

*  Adam  Smith,  and  most  of  the  subsequent  writers  have  included 
cattle  in  the  list  of  things  that  have  in  rude  times  served  this  func- 
tion. Smith  says,  Book  I.,  Chapter  IV.,  "Wealth  of  Nations  "  : 

"  In  the  rude  ages  of  society,  cattle  are  said  to  have  been  the  common 
instrument  of  commerce ;  and,  although  they  must  have  been  a  most 
inconvenient  one,  yet  in  old  times  we  find  things  were  frequently 
valued  according  to  the  number  of  cattle  which  had  been  given  in 


514  OF  MONEY.  Book  V. 

the  metals,  and  particularly  the  precious  metals,  so  well 
fill  all  the  requirements  of  a  medium  of  exchange,  that 
wherever  they  have  become  well  known  mankind  have 
applied  them  to  this  use.  At  first  they  were  doubtless 
weighed,  and  perhaps  tested,  with  every  passage  from 
hand  to  hand  j  but  as  their  use  for  purposes  of  exchange 
became  more  common,  the  same  desire  to  economize  labor 
which  leads  the  baker  to  give  his  bread  the  form  and  shape 
of  loaves  or  rolls,  and  the  tobacconist  or  tea-dealer  to  put 
up  his  commodities  into  uniform  packages,  must  soon  have 
led  to  the  running  of  the  metals  used  as  media  of  exchange 
into  pieces  of  definite  weight  and  purity,  so  that  they  may 
be  passed  from  hand  to  hand  without  the  trouble  of 
weighing  and  testing  them.  To  make  these  pieces  of 
circular  form,  since  that  is  the  most  convenient  and  the 
least  subject  to  abrasion  in  handling,  and  to  afford  evidence 
that  they  yet  retained  their  original  substance  by  stamping 
their  sides  and  edges,  are  obvious  devices  that  seem  to  have 


exchange  for  them.     The  armor  of  Diomede,  says  Homer,  cost  only 
nine  oxen ;  but  that  of  Glaucus  cost  an  hundred  oxen." 

Although  I  have  hitherto  accepted  this  statement,  closer  consid- 
eration now  convinces  me  that  the  inconvenience  attaching  to  such 
a  use  of  cattle  never  could  have  permitted  them  to  take  the  place  of 
money.  As  for  the  authority  of  Homer,  the  state  of  the  arts  assumed 
in  the  Iliad  would  imply  the  use  of  metal  money,  and  the  Marquis 
Gainier  has  contended  that  the  oxen  spoken  of  were  really  coins. 
But  this  supposition  is  not  the  only  alternative  to  supposing  that  the 
allusions  in  Homer's  poems  are  to  be  taken  as  indicating  that  cattle 
were  in  use  as  the  common  medium  of  exchange  and  common  mea- 
sure of  value.  In  ordinary  speech,  and  especially  in  poetry,  which 
eschews  the  exactness  of  monetary  terms,  such  things  as  cattle,  lands, 
slaves,  have  always  been  used  to  convey  a  vague  but  striking  idea  of 
wealth  or  value ;  and  it  seems  far  more  reasonable  so  to  understand 
the  references  of  ancient  writers  than  to  take  them  as  proof  that 
commodities  so  inconvenient  to  divide,  preserve  and  transfer  as  cat- 
tle ever  passed  from  the  position  of  an  article  of  exchange  to  that  of 
its  common  medium  and  measure. 


Chap.  V.  THE  GENESIS  OF  MONEY.  515 

been  adopted  wherever  sufficient  skill  in  the  arts  had  been 
attained  and  the  metals  were  in  this  way  used.  And  thus 
by  a  natural  development  in  use,  a  commodity  peculiarly 
adapted  to  the  purpose  becomes,  in  the  shape  of  coined 
money,  the  commodity  which  serves  as  a  medium  of 
exchange  and  measure  of  value  for  all  commodities  and 
services,  and  which  has  been  in  use  among  peoples  of  the 
most  advanced  civilization  for  long  ages  and  still  remains 
in  use,  though  not  in  exclusive  use,  to  our  day. 

But  while  the  first  purpose  of  coinage  is,  we  may  safely 
assume,  to  save  the  trouble  of  weighing  and  testing  the 
commodity  which  has  become  a  common  medium  of 
exchange,  the  general  use  of  these  coins  as  giving  evidence 
of  weight  and  purity  must  gradually  have  the  effect  of 
transferring  the  quality  of  ready  exchangeability  from  the 
commodity  to  the  coin.  The  habit  of  weighing  and  testing 
passes  away ;  even  the  amount  of  the  commodity  embodied 
in  the  coin  is,  by  the  great  majority  of  those  who  use  it, 
forgotten  or  not  heeded ;  and  the  shape,  size,  color  and 
devices  of  the  coin  become  the  things  that  give  it  circula- 
tion. An  American  Eagle,  or  ten-dollar  piece,  contains  so 
many  grains  of  gold  of  a  certain  fineness,  and  exchanges 
at  the  value  of  the  gold.  But  not  one  in  ten  thousand  of 
those  who  use  this  coin,  and  who  know  its  value  in  rela- 
tion to  other  things  that  they  are  in  the  habit  of  buying 
and  selling,  know  how  many  grains  of  gold  it  contains. 
A  man  with  a  ten-dollar  gold  piece  will  find  no  difficulty 
in  the  United  States  in  fairly  exchanging  it  for  anything 
he  may  happen  to  want,  but  he  would  find  much  difficulty 
in  fairly  exchanging  the  same  quantity  of  gold  in  the 
shape  of  dust  or  of  an  ingot,  anywhere  except  at  a  mint 
or  with  a  bullion  dealer. 

A  curious  evidence  of  this  tendency  to  accept  the  sign 
rather  than  the  substance  is  given  in  the  history  of  the 
American  trade  dollar.  For  many  years  much  of  the  ex- 


616  OF  MONEY.  Book  V. 

port  of  silver  to  China  has  been  in  the  shape  of  Mexican 
dollars,  the  stamp  of  which  has  become  known  there  as 
evidencing  a  certain  weight  of  silver.  Thinking  that  it 
might  take  the  place  in  China  of  the  Mexican  coin  the 
American  government  in  1874  coined  what  was  called  a 
trade  dollar.  It  was  a  better  finished  and  handsomer  coin 
than  the  Mexican  dollar,  and  contained  a  greater  weight  of 
silver.  But  the  Chinese  preferred  a  coin  whose  look  they 
had  become  familiar  with,  to  one  that  was  new  to  them, 
even  though  the  latter  was  of  greater  intrinsic  value.  The 
attempt  was  a  failure,  and  after  an  instructive  domestic 
experience,  which  it  is  not  worth  while  to  speak  of  here, 
the  coinage  of  the  trade  dollar  was  stopped. 

Now  this  transfer  of  ready  exchangeability  from  the 
commodity  to  the  coin,  with  the  accompanying  relegation 
of  the  commodity  itself  to  the  same  position  in  exchange 
held  by  other  commodities,  which  takes  place  as  a  result 
of  the  use  of  coin  money,  is  a  matter  of  great  importance, 
leading  ultimately  to  a  complete  change  in  the  nature  of 
the  money  used. 

In  the  coinage  of  the  precious  metals  the  use  of  com- 
modities as  a  medium  of  exchange  seems  to  have  reached 
its  highest  form.  But  the  very  same  qualities  which  of 
all  commodities  best  fit  the  precious  metals  for  this  use, 
attach  or  may  attach  in  still  higher  degree  to  something 
which,  having  no  material  form,  may  be  passed  from  person 
to  person  or  place  to  place  without  inconvenience  from 
bulk  or  weight,  or  danger  of  injury  from  accident,  abrasion 
or  decay.  This  something  is  credit  or  obligation.  And 
as  the  advance  of  civilization  goes  on,  the  same  tendency 
to  seek  the  gratification  of  desire  with  the  least  exertion, 
which  with  a  certain  advance  of  civilization  leads  to  the 
development  of  commodity  money,  leads  with  its  further 
advance  to  the  utilization  of  credit  as  money. 

Movement  in  this  direction  may  be  distinguished  along 
three  lines:  1— The  admixture  in  coinage  of  obligation 


Chap.  r.  THE  GENESIS  OF  MONEY.  517 

value  with  production  value.  2— The  use  of  obligation 
or  credit  as  representing  an  economizing  commodity 
money.  3— The  use  of  pure  credit  money. 

We  are  here  considering  only  money.  Not  only  is  credit 
a  facilitator  of  exchange  before  money  of  any  kind  is 
developed,  but  the  same  social  progress  which  shows  itself 
in  the  development  of  money  also  shows  itself  in  the 
extension  of  credit.  If  the  use  of  money  supersedes  the 
use  of  credit  in  some  exchanges,  it  is  only  where  the  use 
of  credit  is  difficult  and  inconvenient  j  and  in  facilitating 
exchanges  over  wider  areas  than  the  use  of  the  primitive 
forms  of  credit  would  have  been  equal  to,  it  also  increases 
that  mutual  knowledge  and  mutual  desire  to  exchange 
that  are  necessary  to  the  extension  of  credit.  Although  the 
primary  and  local  function  of  money  is  that  of  affording 
a  common  medium  of  .exchange,  its  secondary  function  of 
affording  a  common  measure  of  values  soon  becomes  of 
greater  importance,  and  the  extension  of  credits  in  our 
modern  civilization  is  far  more  striking  and  important 
than  the  extensions  in  the  use  of  money  as  a  medium  of 
exchange.  Though  the  use  of  any  particular  money  as  a 
medium  of  exchange  is  still  local,  the  money  of  any  one 
country  circulating  only  to  a  very  limited  extent  in  other 
countries,  yet  the  development  of  credits  has  been  such 
that  the  exchange  of  commodities  to  the  ends  of  the  earth 
and  among  peoples  using  different  moneys  as  mediums  of 
exchange,  is  conducted  by  means  of  it.  But  what  we  are 
considering  now  is  not  this  development  of  commercial 
credits,  but  the  way  in  which  the  use  of  commodity  money 
passes  into  the  use  of 'credit  money ;  or  in  other  words,  the 
way  in  which  the  coinage  of  production  value  into  a 
convenient  medium  of  exchange  passes  into  the  coinage 
of  obligation  values. 

The  demand  for  any  metal  in  exchange  is  at  first,  like 
the  demand  for  other  things  in  exchange,  a  demand  for 
consumption;  and  its  value  or  rate  of  exchange,  is 


518  OF  MONEY.  Book  V. 

determined  by  the  cost  of  producing  it  in  merchantable 
form.  As  one  or  another  of  the  metals  began  to  come 
into  use  as  a  medium  of  exchange,  the  largest  demand  for 
it  would  doubtless  for  some  time  still  be  for  consumption, 
and  any  change  in  the  form  of  the  metal  made  to  fit  it  for 
this  new  use  would  at  first  entail  little  or  no  greater  cost 
than  that  of  the  ordinarily  merchantable  form.  Thus  the 
value  of  the  metal  used  as  money  would  at  first  be  no 
greater  than  that  of  the  same  metal  intended  for  consump- 
tion. But  when  coinage  fairly  began,  something  more  of 
labor  would  be  required  to  produce  the  stamped  and 
finished  coin  than  to  produce  the  mere  ingot  of  merchant- 
able shape. 

Hence  there  are,  or  may  be,  two  elements  in  the 
exchange  value  of  metal  coin— (1)  the  intrinsic  value,  or 
value  of  the  metal  itself,  which  is  governed  by  the  cost  of 
producing  it  in  merchantable  form ;  and  (2)  the  cost  of 
changing  it  from  that  form  into  the  form  of  finished  coin. 
This  second  element,  the  charge  for  coinage,  is  called 
seigniorage,  from  the  idea  that  the  coining  of  money  has 
from  the  earliest  times  been  deemed  a  function  of  the 
sovereign— the  seignior  or  lord— as  representative  of 
organized  society  or  the  state. 

There  are  two  different  ways  in  which  it  has  been 
customary  to  pay  for  turning  a  merchantable  material 
into  a  finished  product.  Thus :  From  time  immemorial 
until  the  present  when  machinery  has  begun  to  revolu- 
tionize industrial  methods,  it  was  the  custom  for  the  man 
who  wanted  a  suit  of  clothes  to  buy  the  material,  take  it 
to  a  tailor,  and  pay  him  for  the  work  of  making  it  into  a 
suit.  The  tailor  was  not  presumed  to  keep  any  of  the  cloth, 
and  if  he  did  so  it  was  called  "  cabbage."  During  the 
same  time  it  was,  on  the  contrary,  the  universal  custom  for 
the  miller  to  get  his  pay  by  keeping  a  part  of  the  material 
brought  him  for  conversion.  The  farmer  or  purchaser 


Chap.  V.  THE  GENESIS  OF  MONEY.  619 

brought  his  grain  to  the  mill,  receiving  back  less  than  its 
equivalent  in  meal,  the  difference  being  the  toll  that  the 
miller  retained  for  the  service  of  grinding.  The  manu- 
facturer who  is  now  succeeding  both  the  old  tailor  and 
the  old  miller  buys  the  material  and  sells  the  finished 
product. 

Now  the  conversion  of  metal  into  coin  seems  always  to 
have  been  paid  for  in  the  same  way  as  the  conversion  of 
grain  into  meal  or  flour,  by  a  toll  or  deduction  in  the 
return.  This  toll  or  seigniorage  may  be  less  or  more  than 
the  actual  cost  of  coinage.  It  is  what  the  lord  or  state, 
who  has  the  sole  privilege  of  coinage,  chooses  to  take  for 
it;  the  difference  between  the  rate  at  which  metal  is 
received  or  bought  at  the  mint  and  the  rate  at  which  it  is 
returned  or  issued  in  coin. 

Had  the  coinage  of  metal  into  money  been  left  to  the 
free  competition  of  individual  enterprise,  the  charge  for 
this  conversion  would  have  tended  to  the  lowest  point  at 
which  coin  could  be  produced  in  sufficient  quantities  to 
supply  the  demand.  But  so  far  as  we  can  see  this  has 
never  been  the  case.  The  primary  object  of  coinage  being 
the  certification  of  weight  and  fineness,  that  is  obviously 
best  assured  by  the  stamp  of  the  highest  and  most  widely 
known  authority,  that  of  the  sovereign  or  state.  Where 
coinage  is  thus  monopolized  in  the  hands  of  the  sovereign, 
the  element  of  seigniorage  in  the  value  of  coin  may  be 
eliminated  altogether  by  the  agreement  or  practice  of  the 
sovereign  to  return  in  coin  the  full  amount  of  metal 
brought  to  his  mints,  as  is  to-day  the  case  in  some  countries 
with  some  metals  j  or  it  may  be  extended  so  as  to  become 
the  most  important  of  the  two  elements  in  the  value  of 
coin  by  the  refusal  of  the  sovereign  to  coin  on  other  terms 
and  the  exclusion  or  refusal  of  other  coinage.  Indeed, 
by  the  selection  of  some  very  cheap  commodity  for  the 
material  of  coinage,  it  may  become  practically  the  only 


520  OF  MONEY.  Book  V. 

element  of  value.  For,  as  Kicardo  pointed  out,  the  whole 
exchange  value  of  paper  money  may  be  considered  as  a 
charge  for  seigniorage. 

The  reason  of  this  fact  that,  the  issuance  of  money  being 
a  monopoly,  the  element  of  intrinsic  value  may  be  partially 
or  entirely  eliminated  without  loss  of  usefulness,  is  to  be 
found  in  the  peculiar  use  of  money.  The  use  of  other 
commodities  is  in  consumption.  The  use  of  money  is  in 
exchange.  Thus  the  intrinsic  character  of  money  is  of  no 
moment  to  him  who  receives  it  to  circulate  again.  The 
only  question  that  he  is  concerned  with  is  as  to  the 
readiness  of  others  to  receive  it  from  him  when  he  wants 
in  his  turn  to  pass  it  on.  And  this  readiness  where  coined 
money  comes  into  use  as  the  common  medium  of  exchange 
is  associated  with  coinage,  which  becomes  the  badge  or 
stamp  of  circulation. 

There  are  to-day  certain  commodities  having  a  large 
and  wide- spread  sale  in  neatly  put  up  packages  under  pro- 
prietary names,  such  as  Pears'  Soap,  Colman's  Mustard, 
Royal  Baking  Powder,  and  so  on.  The  reputation  as  to 
quantity  and  quality  of  contents  which  has  been  secured 
for  the  packages  bearing  such  a  trade-mark  gives  their 
manufacturers  proprietary  profits  often  very  considerable 
that  are  analogous  to  seigniorage.  For  a  short  time  and 
to  a  small  extent  these  profits  might  be  increased  by 
decreasing  the  quality  of  the  goods.  Those  who  bought 
them  to  sell  again  would  at  first  be  unconscious  of  the 
difference  and  would  buy  as  before.  But  as  soon  as  they 
reached  the  hands  of  purchasers  for  consumption,  the 
difference  would  be  detected  and  the  demand  would 
decline,  for  the  demand  of  those  who  buy  such  things  to 
sell  again  springs  from  the  demand  of  those  who  buy  for 
consumption. 

But  (and  the  expedients  resorted  to  in  times  of  sudden 
and  acute  monetary  scarcity  may  suggest  this)  let  us 


Chap.  F.  THE  GENESIS  OF  MONEY.  521 

imagine  some  such  proprietary  packed  article  to  pass  into 
use  as  the  medium  of  exchange.  The  increased  demand 
caused  by  the  new  and  wider  use  would  enable  the  owners 
of  the  trade-mark,  by  restricting  supply  of  which  they 
would  have  exclusive  control,  to  carry  up  the  value  of  the 
article  so  far  above  that  of  the  contained  commodity  that 
it  would  pass  out  of  use  for  consumption.  Yet  so  long  as 
the  demand  for  it  as  a  medium  of  exchange  continued,  it 
would  have  use  for  that  purpose,  and  the  owners  of  the 
trade-mark  could  not  merely  keep  up  the  price,  but  could 
with  impunity  reduce  the  quantity  and  quality  of  the 
contents  of  their  packages  to  almost  any  extent.  For 
since  every  acceptance  of  a  thing  in  exchange  is  in  reality 
a  purchase  of  it,  and  every  transfer  of  it  in  payment  of 
an  obligation  or  in  return  for  any  other  thing  is  in  reality 
a  sale,  the  entire  demand  for  an  article  used  only  as  a 
medium  of  exchange  would  be  with  a  view  to  subsequent 
sale— would  be  a  demand  of  merchants  or  traders,  who  are 
not  concerned  with  the  intrinsic  qualities  of  what  they  buy 
to  sell  again,  but  only  with  its  salability. 

In  the  illustration  I  have  used,  the  possibility  of  les- 
sening the  quality  or  quantity  of  the  packages  without 
lessening  their  value  as  a  medium  of  exchange,  is  depend- 
ent on  their  having  passed  out  of  use  for  consumption 
and  the  demand  for  them  being  entirely  the  demand 
for  use  in  exchange.  For,  so  long  as  any  part  of  the 
demand  was  a  demand  for  consumption,  the  lessening  of 
commodity  value  would,  by  checking  the  total  demand, 
operate  at  once  to  reduce  value  not  merely  of  that  part 
used  for  consumption,  but  that  part  used  for  exchange. 

Now  the  first  coined  money  being  commodity  money, 
the  demand  for  it  would  be  for  a  long  time,  in  part  at  least, 
a  demand  for  consumption.  In  the  simpler  stage  of  the 
arts,  coin  would  be  much  more  frequently  than  now  beaten 
or  melted  into  plate,  adornments,  ornaments,  etc.  And 


622  OF  MONEY.  Book  V. 

more  important  still  perhaps,  it  would  continue  to  be  used 
as  a  commodity  in  the  exchange  with  other  countries. 
It  is  probable  that  the  coinage  of  the  more  important 
sovereigns  had  a  far  wider  area  of  diffusion  when  inter- 
national commerce  was  much  less  than  it  is  now.  For, 
although  the  area  of  commerce  was  more  limited  than 
now,  there  was  proportionately  more  of  the  area  without 
any  coinage  of  its  own,  and  the  development  of  credit  as 
a  medium  of  international  exchanges,  the  use  of  coin  in 
them  as  a  conveniently  portable  commodity,  was  probably 
relatively  greater  than  now. 

Now,  the  demand  for  coin  sent  abroad,  as  American 
gold  sent  to  England,  like  the  demand  for  coin  for  use  in 
the  arts,  is  a  demand  for  use  in  consumption  and  would 
quickly  show  itself  in  a  lessening  of  aggregate  demand 
and  consequently  of  value,  upon  a  reduction  of  the  com- 
modity value  of  coin,  no  matter  how  strictly  the  workmen 
of  the  mints  were  sworn  to  secrecy,  as  was  the  device  of 
sovereigns  who  contemplated  deteriorating  their  coinage. 

But  still  more  important  is  the  fact  that  in  order  to 
keep  up  the  value  of  coin  while  diminishing  its  intrinsic 
value  it  is  necessary  that  the  supply  be  strictly  limited. 
But  the  sovereigns,  whether  princes  or  republics,  who 
have  resorted  to  the  expedient  of  debasing  their  coinage 
have  generally  done  so  for  the  purpose  of  turning  the 
same  amount  of  metal  into  more  coin,  rather  than  that  of 
keeping  the  same  amount  of  coin  in  circulation  with  the 
use  of  less  metal,  or  have  been  unable  to  resist  the  temp- 
tation to  do  this  when  they  found  opportunity. 

That  the  circulating  value  of  money  need  not  necessarily 
depend  on  its  intrinsic  value,  must  have  been  clear  to 
discerning  men  as  soon  as  the  habitual  use  of  coined 
money  had  made  its  signs  and  emblems  the  accepted 
tokens  of  value,  so  that  it  passed  from  hand  to  hand 
without  testing  and  usually  without  weighing.  The  fact 


Chap.  V.  THE  GENESIS  OF  MONEY.  523 

that  coins  that  had  lost  something  of  their  intrinsic  value 
by  abrasion  continued  to  pass  current,  must  have  made 
clipping  and  filling  and  sweating,  early  devices  of  the 
cunning,  which  raised  figures  and  milled  edges  would  not 
prevent,  unless  supplemented  by  such  mercantile  stipulation 
or  legislative  enactment  as  secured  common  agreement  not 
to  accept  such  coins.  This  of  itself  would  show  that  the 
circulating  value  of  a  coin  did  not  as  a  matter  of  fact 
depend  upon  the  value  of  the  material  it  contained. 

Thus  to  the  ministers  and  advisers  of  the  sovereigns, 
who  seem  everywhere  to  have  assumed  from  the  first 
exclusive  privilege  of  coming,  it  must  have  seemed  an 
easy  and  safe  economy  to  reduce  the  cost  of  the  coin  by 
substituting  for  its  material  some  part  of  cheaper  metal. 
Hence  came  those  numerous  and  repeated  reductions  in 
the  value  of  coins  which  are  a  marked  feature  in  all 
monetary  history ;  which  have  reduced  the  English  pound 
sterling  to  but  a  fraction  of  its  original  equivalence  to  a 
pound  troy,  and  in  other  countries  have  brought  about  a 
still  greater  difference. 

So  far  as  the  principal  and  most  important  coinage  is 
concerned,  these  attempts  have  from  time  to  time  ended 
in  disaster,  and  in  the  final  reunion  of  circulating  value 
with  commodity  value,  either  by  the  rejection  and  with- 
drawal of  the  debased  coin  and  a  recoinage,  or  more 
frequently  by  the  lowering  of  the  circulating  value  to  the 
level  of  the  commodity  value. 

This,  however,  is  not  a  necessary  result  of  a  debase- 
ment of  coinage,  as  is  so  often  assumed.  A  less  valuable 
metal  may  be  substituted  in  a  coin  for  a  more  valuable 
metal  without  lessening  the  circulating  value,  provided— 
and  this  is  the  essential  condition  —  it  continues  to 
be  as  hard  for  those  who  use  the  coin  in  exchanges  to 
get  the  one  as  it  was  to  get  the  other  j  or  in  other  words 
that  it  continues  to  represent  the  same  exertion. 


524  OF  MONEY.  Book  V. 

For  all  exchange  is  really  the  exchange  of  labor,  and 
the  rate  at  which  all  things  tend  to  exchange  for  all  other 
things  is  determined  by  the  relative  difficulty  of  obtaining 
them.  That  a  ten  pound  note  of  the  Bank  of  England, 
having  practically  no  intrinsic  value,  will  exchange  for 
ten  gold  sovereigns,  having  an  intrinsic  value  of  that 
amount  of  gold— that  a  five  dollar  note  of  the  government 
of  the  United  States,  having  no  intrinsic  value ;  five  silver 
dollars,  having  an  intrinsic  value  of  something  like  two 
dollars  and  a  half  j  and  a  five  dollar  piece,  having  an 
intrinsic  value  of  five  dollars,  will  exchange  in  this  country 
for  each  other  or  for  the  same  amount  of  commodities  or 
services  of  any  kind,  is  because  the  difficulty  of  getting 
these  things,  the  quantity  and  quality  of  exertion  ordinarily 
required  to  obtain  them,  is  precisely  the  same.  Should  it 
become  in  the  slightest  degree  harder  to  get  one  of  these 
things  than  the  others,  this  will  show  itself  in  a  change  of 
the  rate  at  which  they  exchange.  In  this  case  we  say  that 
the  one  commands  a  premium  or  that  the  others  bear  a 
discount. 

The  difficulty  of  procurement  which  brings  to  the  same 
value  the  gold  coin,  silver  coin  and  notes  spoken  of,  so 
that  they  will  exchange  for  each  other  or  for  equal  quan- 
tities of  other  things,  is,  though  of  the  same  intensity,  of 
different  kinds.  In  the  gold  coin,  it  is  the  difficulty  of 
mining,  refining  and  transporting  the  metal  (for  neither  in 
Great  Britain  nor  in  the  United  States  does  the  govern- 
ment make  any  charge  or  exact  any  seigniorage"  for  the 
coinage  of  gold).  In  the  silver  coin,  it  is  partly  the  difficulty 
of  obtaining  the  metal  and  partly  the  difficulty  imposed 
by  the  only  terms  on  which  the  government  will  coin  silver 
dollars— or  in  other  words,  by  the  seigniorage  it  demands. 
In  the  notes,  it  is  the  difficulty  imposed  by  the  restrictions 
on  the  issuance  of  such  notes — or,  as  it  may  be  considered, 
all  seigniorage.  What  in  short,  gives  to  the  paper  notes 
or  coins  of  small  intrinsic  value  the  same  exchange  value 


Chap.  V.  THE  GENESIS  OF  MONEY.  525 

as  the  gold  coin,  is  that  the  government  concerned,  which 
has  the  monopoly  of  coinage  in  its  respective  country,  will 
not  issue  one  of  them  on  any  less  terms  than  it  does  the 
other,  thus  making  them  all  to  the  individual  equally  hard 
to  get. 

What  has  everywhere  caused  the  failure  of  the  innumer- 
able attempts  to  reduce  the  intrinsic  value  of  the  principal 
and  important  coin,  without  reducing  its  circulating  value, 
is  not  the  impossibility  of  the  task,  but  the  fact  that  the 
sovereigns  who  have  attempted  it  did  not,  and  perhaps 
could  not,  observe  the  necessary  condition  of  success,  the 
strict  limitation  of  supply.  But  the  purpose  of  the 
sovereigns,  whether  princes  or  republics,  in  debasing 
coinage  has  been,  or  under  pressure  of  the  temptation  has 
become,  not  an  attempt  to  make  a  less  value  in  metal 
serve  for  the  same  quantity  of  coin,  but  to  issue  a  greater 
quantity  of  coin  on  the  same  value  in  metal.  Thus  instead 
of  restricting  the  supply  of  coin  to  the  point  where  the 
demand  for  its  use  as  a  medium  of  exchange  would  keep 
up  its  exchange  value  irrespective  of  the  lessening  in  its 
intrinsic  value,  they  proceeded  at  once  to  increase  supply 
on  a  falling  demand,  and  met  the  inevitable  depreciation 
of  circulating  value  by  fresh  increase  of  supply,  so  that 
no  matter  how  much  the  intrinsic  value  of  the  coin  was 
reduced,  its  circulating  value  followed. 

[Principle  same  as  that  which  caused  depreciation  in  French 
assignat,  Continental  money,  etc.]  l 

It  is  this  fall  of  circulating  value  with  the  fall  of  intrinsic 
value  where  it  is  not  kept  up  by  restriction  of  supply  that 
has  through  succeeding  depreciations  reduced  the  English 
pound  sterling  to  but  a  fraction  of  its  original  equivalence 
to  a  pound  troy,  and  in  other  countries  has  brought  about 
a  still  greater  difference. 

i  Note  in  MS.  indicating  illustration  to  be  developed  by  author.  —  H.  G.,  JR. 


CHAPTER  VI. 

THE  TWO  KINDS  OF  MONEY. 

[SHOWING  THAT  ONE  ORIGINATES  IN  VALUE  FROM  PRODUC- 
TION, THE  OTHER  IN  VALUE  FROM  OBLIGATION. 

Money  peculiarly  the  representative  of  value— Two  kinds  of  money 
in  the  more  highly  civilized  world— Commodity  money  and  value 
from  production — Credit  money  and  value  from  obligation — Of 
credit  money— Of  commodity  money— Of  intrinsic  value— Gold 
coin  the  only  intrinsic  value  money  now  in  circulation  in  the 
United  States,  England,  France  or  Germany.]  * 

WHILE  value  is  always  one  and  the  same  power,  that 
of  commanding  labor  in  exchange,  there  are  as  we 
have  seen,  with  reference  to  its  sources,  two  different 
kinds  of  value— that  which  proceeds  from  production  and 
that  which  proceeds  from  obligation.  Now  money  is  pecu- 
liarly the  representative  of  value— the  common  medium  or 
flux  through  which  things  are  exchanged  with  reference 
to  their  value,  and  the  common  measure  of  value.  And 
corresponding  to  and  proceeding  from  this  distinction 
between  the  two  kinds  of  value,  there  are,  we  find,  two 
kinds  of  money  in  use  in  the  more  highly  civilized  world 
to-day— the  one,  which  we  may  call  commodity  money, 
originating  in  the  value  proceeding  from  production ;  and 
the  other,  which  we  may  call  credit  money,  originating  in 
the  value  proceeding  from  obligation. 

This  distinction  has  of  course  no  relation  to  differences 
of  denomination,  such  as  those  between  English  pounds, 

i  Merely  the  title  in  this  heading  appears  in  MS.  —  H.  G.,  JR. 
526 


Cliap.VL  THE  TWO  KINDS  OF  MONEY. 

French  francs  and  American  dollars.  These  are  but 
differences  of  nomenclature.  Nor  yet  does  it  coincide 
with  differences  in  the  material  used  as  money,  as  for 
instance  that  between  metal  money  and  paper  money. 
For  while  all  paper  money  is  credit  money,  all  metal 
money  is  not  commodity  money.  What  I  understand  by 
commodity  money  is  money  which  exchanges  at  its  value 
as  a  commodity,  that  is  to  say,  which  passes  current  at  no 
more  than  its  "  intrinsic  value,"  or  value  of  the  material 
of  which  it  is  composed.  Credit  money  is  money  which 
exchanges  at  a  greater  value  than  that  of  the  material  of 
which  it  is  composed.  In  the  one  case  the  whole  value  for 
which  the  money  exchanges  is  the  value  it  would  have  as 
a  commodity.  In  the  other  case  the  value  for  which  the 
money  exchanges  is  greater  than  its  commodity  value,  and 
hence  some  part  at  least  of  its  exchange  value  as  money  is 
given  to  it  by  credit  or  trust. 

For  instance,  a  man  who  exchanges  ten  dollars'  worth 
of  wheat  for  a  coin  containing  ten  dollars'  worth  of  gold 
makes  in  reality  a  barter.  He  exchanges  one  commodity 
for  an  equal  value  of  another  commodity,  crediting  or 
trusting  nobody,  but  having  in  the  coin  he  has  received  a 
commodity  which,  irrespective  of  its  use  as  money,  has  an 
equal  value  to  that  he  gave.  But  the  man  who  exchanges 
ten  dollars'  worth  of  wheat  for  a  ten-dollar  note  receives 
for  a  commodity  worth  ten  dollars  what,  as  a  commodity, 
has  only  the  value  of  a  bit  of  paper,  a  value  practically 
infinitesimal.  What  renders  him  willing  to  take  it  as  an 
equivalent  of  the  wheat  is  the  faith  or  credit  or  trust  that 
he  can  in  turn  exchange  it  as  money  at  the  same  valuation. 
If  he  drops  the  coin  into  the  sea,  he  loses  value  to  the 
extent  of  ten  dollars,  and  the  sum  of  wealth  is  lessened  by 
that  amount.  If  he  burns  the  paper  note,  he  suffers  loss, 
to  the  value  of  ten  dollars,  but  he  alone ;  the  sum  of  wealth 
is  only  innnitesimally  lessened.  Paper  money  is  in  truth 


528  OF  MONEY.  Boole  V. 

of  the  same  nature  as  the  check  or  order  of  an  individual 
or  corporation  except  (and  in  this  lies  the  difference  that 
makes  it  money)  that  it  has  a  wider  and  readier  credit. 
The  value  of  the  coin  of  full  intrinsic  value,  like  the  value 
of  the  wheat,  is  a  value  that  comes  from  production.  But 
the  value  of  the  paper  money  is,  like  the  value  of  the  check 
or  order,  a  value  from  obligation. 

The  first  money  in  use  was  doubtless  a  commodity 
money,  and  there  are  some  countries  where  it  is  still  the 
principal  money,  and  places  perhaps  where  it  is  the  only 
money.  But  in  the  more  highly  civilized  countries  it  has 
been  very  largely  superseded  by  credit  money.  In  the 
United  States,  for  instance,  the  only  commodity  or  intrinsic 
value  money  now  in  circulation  is  the  gold  coinage  of  the 
United  States.  Our  silver  dollars  have  an  intrinsic  or 
commodity  value  of  only  some  fifty  cents,  and  the  value 
of  our  subsidiary  coinage  is  still  less.  That  they  circulate 
in  the  United  States  at  the  same  value  as  gold  shows  that 
their  exchange  value  has  no  reference  to  their  intrinsic 
value.  They  are  in  reality  as  much  credit  money  as  is  the 
greenback  or  treasury  note,  the  difference  being  that  the 
stamp,  which  evidences  their  credit  and  thus  secures  their 
circulation,  is  impressed  not  on  paper,  but  on  a  metallic 
material.  The  substitution  of  what  is  now  the  cheapest 
of  metals,  steel,  or  the  utter  elimination  of  intrinsic  value, 
would  not  in  the  slightest  lessen  their  circulating  value. 
What  is  true  of  the  United  States  in  this  respect  is  also 
true  of  England,  of  France,  of  Germany,  and  of  all  the 
nations  that  have  adopted  gold  as  the  common  measure  of 
value.  Their  only  commodity  money  is  certain  gold  coins  j 
their  other  coins  being  token  or  credit  money.  In  the 
countries  that  have  retained  silver  as  the  common  measure 
of  value  the  standard  coin  is  generally  commodity  money, 
but  the  subsidiary  coins,  having  less  intrinsic  value,  are  in 
reality  credit  money. 


INDEX. 


Adapting,  its  place  in  produc- 
tion, 327-330,  332,  353-354,  358, 
400,  414. 

Agriculture,  alleged  law  of  di- 
minishing returns  in,  174,  335- 
338,  and  the  Malthusian  the- 
ory, 336,  337-338 ;  confusion  of 
the  spacial  law  with,  351-356 ; 
relation  of  space  to,  357,  358. 

Analysis,  definition  of,  29. 

Animals,  how  distinguished  from 
man,  11-18,  19,  29,  36.  51,  53, 
56,  59,  77,  82,  85,  287,  291-292, 
397-399;  how  they  resemble 
man,  13-14,  85,  291;  and  in- 
stinct, 15-18,291-292,397-398; 
cooperate,  397-399. 

Antinomy,  345-346,  348. 

Aristotle,  final  cause,  50  ;  defini- 
tion of  wealth,  132. 

Austrian  school,  displaced  the 
classical  school,  124,  208-209, 
215,  252 ;  value,  218,  252 ;  mar- 
ginal utilities,  218,  237;  ab- 
sence of  scientific  method  in, 
448-449. 

Bacon,  Francis,  inductive  logic, 
96-97;  right  reasoning,  139; 
Idols  of  the  Forum,  340. 

Bain,  definition  of  wealth,  123. 

Baird,  Henry  Carey,  deduction 
and  induction,  93. 

Beckford,  "Vathek"  and  Font- 
hill,  369. 

Biddle,  Clement  C.,  validity  of 
property,  184. 


Bisset,  Andrew,  natural  rights, 
194. 

Bohm-Bawerk,  Eugen  V.,  does 
not  define  wealth,  124;  teach- 
ings of,  208-209. 

Bowen,  definition  of  wealth, 
122. 

"  Britannica,  Encyclopaedia,"  old 
political  economy  dead,  205- 
206. 

Buckle,  on  civilization,  25 ;  im- 
portance of  Smith's  "Wealth 
of  Nations,"  89;  selfishness  in 
political  economy,  89-90. 

Bull,  Irish,  from  what  its  humor 
comes,  274. 

Cairnes,  J.  E.,  does  not  define 
wealth,  124;  prediction  as  to 
political  economy,  179-181. 

Capital,  confusions  as  to,  120- 
121,  176-177;  meaning  fixed  in 
"  Progress  and  Poverty,"  211, 
270-271,  298-300 ;  wealth  that 
is  called,  293-300;  all,  is 
wealth,  294-295,  296;  but  all 
wealth  not,  294-295,  296 ;  paper 
money  not,  299w.;  other  things 
not,  296-297 ;  definition  of,  293- 
294,  296,  299,  413;  the  third 
factor  in  production,  406,  413- 
415 ;  when  it  may  aid  labor, 
414;  it  does  not  use  labor,  but 
is  used  by  labor,  414-415. 

Carey,  Henry  C.,  induction  and 
deduction,  93-94 ;  protection- 
ism, 196. 


529 


530 


INDEX. 


Carlyle,  Thomas,  repugnance  to 
"  dismal  science,"  88;  German 
thought  in  England,  196. 

Catallactics,  substitute  for  po- 
litical economy,  128-129. 

Cause,  reason  the  power  of  trac- 
ing its  relations,  29-30,  33,  45- 
46;  power  that  apprehension 
of  its  relations  gives,  33-38; 
relative  meaning  of,  46-47; 
ultimate  or  sufficient  reason, 
48-49 ;  Aristotle  on  final, 
50 ;  doctrine  of  final,  50 ;  will 
or  spirit  the  only  explanation 
of  first  or  final,  51-54,  56-57, 
79,  and  called  God,  54,  57,  79; 
Mill's  confusion,  440-443. 

Chalmers,  Dr.,  does  not  define 
wealth,  124;  of  natural  rights, 
186-187. 

"  Chambers'  Encyclopedia," 

death  of  old  political  econ- 
omy, 206-207. 

Christ,  Kingdom  of  Heaven  re- 
vealed to  babes,  139-140  ;  why 
He  sympathized  with  the  poor, 
306-307.  See  Jesus. 

Christianity,  made  to  soothe  the 
rich,  174. 

Civilization,  extensions  of  man's 
powers  in,  19-23,  29-43,  91 ;  rise 
of,  to  what  due,  20-22 ;  what  it 
means,  24-28,  37-38 ;  vagueness 
as  to  what  it  is,  24-25,  Guizot, 
25,  Buckle,  25 ;  its  relation  to 
the  state  or  body  politic,  25-28 ; 
to  the  body  economic  or  Greater 
Leviathan,  27-28,  118,  399-400, 
428 ;  origin  and  genesis  of,  29- 
38 ;  the  germ  of,  33-34 ;  used  as  a 
relative  term,  37 ;  justice,  high- 
est aspect  of,  35 ;  how  it  devel- 
ops, 39-43 ;  as  to  history  of,  37 ; 
extent  of  cooperation  in  mod- 
ern, 20-22,  27,  36-38,  39-40,  43, 
325,  378-379,  426;  machinery 
in,  379;  exchange  at  root  of, 
399-401 ;  cause  of  death  of,  439; 
makes  no  changes  in  man  as 
man,  507. 

Clark,  definition  of  wealth,  123. 

Classical  school,  208. 


Commodity,  as  a  term  for  an  arti- 
cle of  wealth,  282. 

Compensation,  Mill  on,  137-138 ; 
Dove,  192-193;  Spencer,  192- 
193. 

Competition,  in  determining 
value,  251,  253;  office  of,  in 
production,  402-403 ;  the  life  of 
trade,  402,  403 ;  regarded  as  an 
evil,  402;  its  origin,  403;  a 
natural  law,  403. 

Confucius,  meaning  of  recipro- 
city, 306. 

Consequence,  meaning  of,  45-46 ; 
invariable  sequence,  46,  55-56, 
80,  435-436,  437  ;  of  laws  of  na- 
ture, 44-57,  80,  435-436,  437, 
440^43 ;  Mill's  improper  use  of 
word,  440-443. 

Consumption,  not  concerned  with 
distribution,  426. 

Cooperation,  gives  rise  to  civiliza- 
tion, 20-22,  27,  36-38,  39-40,  43 ; 
meaning  in  current  political 
economy,  371,  and  its  true  mean- 
ing, 372 ;  the  two  ways,  371-381 ; 
of  combination  of  effort,  372- 
373,  380;  of  division  or  sep- 
aration of  effort,  372-381 ;  of 
machinery,  379;  extent  of,  in 
modern  civilization,  325,  378- 
379,  426 ;  Smith  on  division  of 
labor,  182,  372,  374 ;  his  three 
heads,  380 ;  a  better  analysis, 
380-381 ;  its  two  kinds,  382-396 ; 
of  directed  or  conscious,  383- 
385,  391-393 ;  of  spontaneous  or 
unconscious,  385-396;  depen- 
dent on  exchange,  332,  378,  399, 
401;  intelligence  that  suffices 
for  one  impossible  for  the  other, 
385, 394-395 ;  conscious,  will  not 
suffice  for  the  work  of  the  un- 
conscious, 393-395;  this  the 
fatal  defect  of  socialism,  391- 
396;  the  spiritual  element  in 
production,  391,  cannot  be 
combined,  392 ;  man  power  and 
mind  power,  392-393;  the 
Greater  Leviathan,  22-23,  27- 
28,  36,  118,  395-396,  399-400, 
428  ;  all  living  things  engage  in, 


INDEX. 


531 


399,  bees  and  ants  from  in- 
stinct, 397-399,  man  from  rea- 
son, 398-399. 

Copernicus,  astronomy  before, 
138 ;  Ms  prudence,  168. 

Corn-laws,  significance  of  agita- 
tion and  repeal  of,  175-176. 

Creation  of  the  world,  and  time. 
367-368. 

Credit,  its  office  in  exchanges. 
491-493,  504-511,  517,  526-528  ; 
paper  money  a  coinage  of, 
511. 

Davis,  Noah  K.,  inductive  and 
deductive  logic,  98-99. 

Debt,  cannot  be  wealth,  137,  277- 
278 ;  value  from  obligation,  262; 
slavery,  262 ;  not  capital,  296. 

Deduction,  as  used  in  political 
economy,  92-100. 

Desire,  man's  reason  in  the  satis- 
faction of,  17-18;  cooperation 
or  the  Greater  Leviathan  in  the 
satisfaction  of,  22-23,  27,  36,  70, 
379 ;  reason  behind,  31-32 ;  ex- 
change springs  from,  37,  512; 
causal  relations,  50-51;  the 
prompter  of  man's  actions,  76, 
81-82,  247,  285,  326,  411,  and 
satisfaction  of,  the  end  and 
aim,  81-82,  83,  285,  326,  411; 
distribution  in  the  satisfaction 
of,  427-428 ;  man  could  not  ex- 
ist without,  83;  philosophies 
teaching  extinction  of,  83 ; 
working  and  stealing  in  the 
satisfaction  of,  71-73;  funda- 
mental law  of  political  econ- 
omy, 76-77,  80,  91,  99,  254,  268, 
332;  width  and  importance  of 
the  field  of  political  economy, 
81-85,  303,  324-325;  many  kinds 
of,  82-83,  85,  247;  subjective 
and  objective,  material  and  im- 
material, 83-85 ;  and  value,  213- 
221,  245,  249,  252-256,  260,  261, 
268;  nature  and  measurement 
of,  246-247;  wealth  and  the 
satisfaction  of,  279-280,  285- 
292,  340,  357;  capital  and  the 
satisfaction  of,  293-297;  three 


modes  in  production  of  satis- 
fying, 332;  origin  of  competi- 
tion and,  403 ;  genesis  of  money 
and,  512-525. 

Dickens,  Charles,  repugnance  to 
the  "dismal  science,"  88. 

Diminishing  returns,  alleged 
law  of,  174,  335-338;  the  real 
law  of,  340,  355-356,  357-364, 
368. 

Distribution,  current  confusion  as 
to  laws  of,  177,  460-461;  the 
laws  of,  and  their  correlation 
treated  in  l '  Progress  and  Pov- 
erty," 202 ;  of  value  from  obli- 
gation, 272;  includes  neither 
transportation  nor  exchange, 
326,  400,  425-426,  nor  taxation, 
426,  nor  consumption,  426 ;  der- 
ivation and  uses  of  the  word, 
423-429 ;  original  meaning,  434 ; 
nature  of,  430-439 ;  a  continua- 
tion of  production,  426-427, 
438-439 ;  deals  with  future  pro- 
duction, 438-439,  and  affected 
through  production,  446-447, 
453;  laws  of,  belong  to  the  nat- 
ural order,  428 ;  not  concerned 
with  human  laws,  432,  but  so 
taught  by  classical  school,  430- 
435;  Mill's  confusion,  430-435, 
440-443,  447-449,  455-459;  com- 
mon perception  of  this,  440-449 ; 
concerned  with  natural  laws, 
435-439,  450^51,  454-459 ;  rela- 
tion to  the  moral  law,  437-438, 
451-453 ;  of  the  death  of  civili- 
zation, 439  ;  human  will  power- 
less to  affect,  443-447 ;  the  great 
laws  of,  444;  real  difference 
from  the  law  of  production, 
450-453;  of  property,  454-459  ; 
causes  of  confusions  as  to  prop- 
erty, 460-469. 

Dollar,  trade,  the  American,  515- 
516. 

Dove,  Patrick  Edward,  on  natural 
rights,  189-194;  compensation, 
192-193. 

Dupont  de  Nemours,  suggested 
Physiocrats'  name,  145w.  See 
Physiocrats. 


532 


INDEX. 


Economic,  as  used  for  politico- 
economic,  66 ;  the  unit,  69. 

Economic  body,  how  evolved  and 
developed,  20-23,  35-37,  118, 
395-396,  428;  gives  rise  to  and 
takes  name  from  body  politic, 
25-28 ;  growth  of  knowledge  an 
aspect  of,  39-40,  41-43;  how 
political  economy  relates  to, 
68-73. 

Economics,  substituted  for  po- 
litical economy,  128-130 ;  what 
it  teaches,  207. 

Economists,  the  French.  See 
Physiocrats. 

Ego,  what  it  is,  47,  69 ;  its  depen- 
dence on  matter,  84-85 ;  desire 
a  quality  of  the,  246 ;  determina- 
tion of  value  and  the,  252. 

Elements.    See  Factor. 

Elizabeth,  Queen,  and  monopo- 
lies, 278. 

Energy,  what  it  is  in  philosophy, 
9;  its  correlative  elements  or 
factors,  9-10 ;  man  but  passing 
manifestation  of,  13-14;  its 
place  in  the  world,  77,  80. 

Evil,  outlived  by  good,  51Qn. 

Evolution,  profound  truth  of,  85. 

Exchange,  how  reason  impels  to, 
35-37;  not  a  separate  depart- 
ment in  political  economy,  425- 
426  ;  law  of  diminishing  returns 
in  production  and,  338  ;  coop- 
eration and,  332,  378,  399,  401 ; 
none  of  the  animals  but  man, 
397-399;  and  the  Greater  Le- 
viathan, 35-36,  399-400  ;  at  the 
root  of  civilization,  399-401; 
even  slavery  involves  it,  400 ; 
motive  of  the  primary  postu- 
late of  political  economy,  401 ; 
money  the  common  medium  of, 
495-503;  all,  is  really  the  ex- 
change of  services  or  com- 
modities, 513-524. 

Exchangeability,  comes  from 
value,  235-249. 

Exchanges,  credit  in,  491-493, 
504-511,  517,  526-528. 

Exchanging,  its  place  in  produc- 
tion, 325-326,  331-332,  354,  397- 


401,  414,  426;  highest  of  the 
three  forms  of  production,  400  ; 
not  a  part  of  distribution,  400, 
425-426. 

Exertion,  fundamental  law  of  po- 
litical economy  and,  86-91,  99, 
254,  268,  332 ;  positive  and  nega- 
tive, 245-249 ;  desire  prompts, 
246 ;  value  a  relation  to.  228- 
234,  242,  244-249,  253-256,  257- 
269,  275,  497-501,  503 ;  manifes- 
tations of,  become  the  common 
measures  of  value,  501-503 ; 
wealth  a  result  of  human,  285, 
287-288;  but  all  human,  not 
wealth,  285-287 ;  essential  idea 
of  wealth,  292,  293 ;  higher  pow- 
ers of,  295-296,  369;  all  that 
political  economy  includes,  301- 
303 ;  spacial  law  and,  360,  363, 
365-366 ;  time  and,  368-370 ;  co- 
operation and,  374 ;  competition 
and,  403;  economic  term  for,  is 
labor,  411;  fundamental  law  of 
human  nature,  512;  value  of 
paper  money  and,  524. 

Experiment,  imaginative,  as  a 
method  in  political  economy, 
29-30, 100 ;  use  of,  240-241,  248- 
249,  436-437,  485-487,  507. 

Factor,  meaning  of  term,  9; 
the  three,  of  the  world,  9-10, 
47,  77,  80;  the  two  original 
factors  of  political  economy, 
77,  413 ;  the  two  necessary  in 
production,  279,  413 ;  the  three 
in  general  production,  405-407, 
444;  land,  the  natural  or  pas- 
sive, 77,  408-410;  labor,  the 
human  or  active,  77,  80,  411- 
412;  capital,  the  compound, 
413-415. 

Fallacies,  how  made  to  pass  as 
truths,  134-136. 

Fawcett,  definition  of  wealth,  122. 

Franchises,  their  value  from  ob- 
ligation, 262-263  ;  permanence 
of  this  value,  310-312 ;  not  real 
wealth,  277-278. 

Free  trade,  advocated  by  Physio- 
crats, 152-153,  165,  and  by 


INDEX. 


533 


Adam  Smith,  164,  165;  weak- 
ness in  Smith's  teaching  of, 
182-183;  sought  by  American 
Peace  Commissioners,  195-196. 

Gainier,  Marquis,  oxen  used  as 
money  in  Homer,  513w.-514w. 

Garrison,  William  Lloyd,  change 
of  public  opinion  towards, 
142. 

German,  confused  political  econ- 
omy, 195-196,  197-199,  208-209, 
283-284,  345,  461;  socialism, 
197-199 ;  trick  of  verbal  contra- 
diction, 341. 

God,  and  final  cause,  47,  50,  52, 
54 ;  the  teological  argument, 
50;  distinct  from  nature,  54, 
55 ;  how  the  reason  posits  it, 
10,  79,  403 ;  the  Most-Merciful, 
31 ;  the  All-Maker,  409 ;  is  just, 
451-452 ;  manifestations  of,  435- 
436,  443-444 ;  Adam's  curse,  91 ; 
made  responsible  for  social  ills, 
174,  333,  336,  355;  Kant  and 
Schopenhauer's  substitute,  348. 

Godoonof,  Boris,  and  serfdom, 
278. 

Good,  it  outlives  evil,  510w. 

Goods,  as  used  in  political  econ- 
omy, 282-283;  the  Austrian 
school,  283-284. 

Gournay.     See  Physiocrats. 

Growing,  its  place  in  production, 
330-331,  353-354,  358,  400,  414; 
relation  of  space  to,  357-364. 

Guizot,  vagueness  in  describing 
civilization,  25. 

Hawaiian  Islands,  Christian  mis- 
sionaries, 297. 

Hegel,  characterized  by  Schopen- 
hauer, 208-209. 

Hern,  Professor,  the  name  plu- 
tology  for  political  economy, 
128-129. 

Historical  school,  its  style,  206; 
absence  of  scientific  method, 
448-449. 

Hobbes's  Leviathan,  22, 25-26,  27 ; 
relation  to  Greater  Leviathan, 
22-23,  27-28,  395-396. 


Homer,  oxen  used  as  money, 
513w.-514w. 

Horace,  endurance  of  his  odes, 
310. 

Hyndman,  H.  M.,  Spence  on 
natural  rights,  185. 

Hypothesis,  as  a  method  in  po- 
litical economy.  See  Experi- 
ment, Imaginative. 

Imaginative  experiment.  See 
Experiment. 

Immortality,  man's  belief  in,  34. 
See  Resurrection. 

Impot  unique,  origin  and  mean- 
ing, 150-151;  the  single  tax, 
150-151. 

Increment,  unearned,  its  mean- 
ing, 150 ;  Mill  on,  150,  195 ;  and 
the  Physiocrats,  355. 

Induction,  as  used  in  political 
economy,  92-100. 

Ingram,  John  Kells,  old  political 
economy  dead,  120w.,  205-206. 

Instinct,  small  development  of,  in 
man,  16,  397-398 ;  large  devel- 
opment in  animals,  15-18,  291- 
292, 397-398 ;  reason  and,  36-37, 
291-292,  397-399. 

Interest,  Smith  not  clear  as  to, 
183;  law  of,  and  the  correla- 
tion with  the  laws  of  rent  and 
wages,  treated  in  "  Progress 
and  Poverty,"  202 ;  one  of  the 
three  great  laws  of  distribution, 
444 ;  futile  attempts  to  regulate. 
445. 

Interests,  special,  study  of  polit- 
ical economy  affected  by, 
xxxiii.-xxxv.,  132-142, 154, 167- 
168,  169,  171-176,  182-184,  207, 
273-274,  333,  447,  461.  See 
Privilege,  Special. 

Intrinsic.    See  Value. 

James,  E.  J.,  on  induction  and 
deduction,  97-98 ;  Smith's  place 
in  political  economy,  169 ;  old 
political  economy  dead,  205-207. 

Jefferson,  Thomas,  why  the  rich 
were  against  Jesus,  132. 

Jesus,  Jefferson  on  why  the  rich 


534 


INDEX. 


were  against  Him.  132.  See 
Christ. 

Jevons,  definition  of  wealth,  122 ; 
confusion  as  to,  196-197 ;  value 
from  marginal  utilities,  218. 

"Johnson's  Encyclopedia,"  old 
political  economy  dead,  206- 
207  ;  definition  of  money,  480. 

Jones,  definition  of  wealth,  121 . 

Justice,  highest  aspect  of  civiliza- 
tion, 35 ;  the  government  of  the 
universe  has  its  foundation  in, 
451;  not  concerned  with  pro- 
duction, 451-452,  but  governs 
distribution,  452 ;  at  the  bottom 
of  property,  456-459;  Montes- 
quieu on,  453. 

Kant,  space  and  time  and  antin- 
omy, 345-346,  348,  350;  and 
Schopenhauer,  346-348 ;  his 
categorical  imperative,  458. 

Knowledge,  man's  earliest,  of  his 
habitat,  11 ;  what  it  is  and  how 
it  grows,  39-43;  springs  from 
cooperation,  20,  39 ;  the  incom- 
municable knowing  called  skill, 
40-41,  59;  the  communicable 
knowing  called,  41-43 ;  that 
properly  called  science,  58-64. 

Labor,  value  of,  240;  various 
senses  of,  243 ;  when  land  value 
is  a  robbery  of,  256 ;  in  relation 
to  space,  357-364;  relation  to 
time,  368-370 ;  combination  and 
division  of,  371-381 ;  Smith  on 
division  of,  182,  372,  374,  380; 
impossibility  of  division  of, 
under  socialism,  394—395 ;  one 
of  the  two  factors  necessary  in 
production,  279, 413  ;  one  of  the 
three  factors  in  general  produc- 
tion, 405-106,  411-412,  413-414; 
its  order,  406-407;  capital  is 
stored,  279,  296,  413 ;  when  cap- 
ital may  aid,  414 ;  capital  used 
by,  414-415 ;  the  essential  prin- 
ciple of  property,  461-462 ;  why, 
though  the  real  measure  of 
value,  it  cannot  serve  as  the 
common  measure,  495-503 ;  all 


exchange  is  really  exchange  of, 
524. 

"Laissezfaire,  laissez  aller,"  153. 

Lalor,  John  J.,  definition  of  polit- 
ical economy,  61-63 ;  definition 
of  wealth,  122. 

Lalor's  Cyclopedia,  induction  and 
deduction.  97-98 ;  Adam  Smith, 
169. 

Land,  basis  of  monopoly  of,  137, 
and  Mill's  condemnation,  137; 
the  term  as  used  in  political 
economy,  352,  408-409,  464 ;  na- 
ture of  its  value,  240 ;  value  of, 
and  desire,  255-256 ;  when  its 
value  is  a  consequence  of  civi- 
lization and  within  the  natural 
order,  256,  and  when  destruc- 
tive of  civilization  and  a  rob- 
bery of  labor,  256;  value  of 
obligation,  265-266,  and  not 
wealth,  265-266,  277-278,  297, 
nor  capital,  297;  can  have  no 
moral  sanctions  as  property, 
265,  and  rightfully  belongs  to 
the  community,  265;  perma- 
nence of  its  value,  310-312; 
man's  dependence  on,  351-352 ; 
extension  the  fundamental  per- 
ception of  the  concept,  352,  this 
confused  and  limited,  78,  353- 
356 ;  intensive  use  of,  made  pos- 
sible by  extensive  use  of,  364; 
first  or  passive  factor  in  pro- 
duction, 77,  405-406,  408-410, 
412-413 ;  importance  of  observ- 
ing order  of,  406-407;  capital 
springs  from  union  of  labor  and, 
406,413;  erroneously  included  in 
the  category  of  private  property, 
460-461 ;  called  by  lawyers  real 
property,  461 ;  Smith's  view  of, 
461 ;  Mill's  attempts  to  defend 
private  property  in,  462;  con- 
fused meanings,  463-466;  dif- 
ferent meanings  of,  466-468; 
Mill  succeeds  only  in  justify- 
ing property  in  the  produce  of 
labor,  469;  of  " improved"  and 
"made,"  463-469. 

Landowners,  their  influence  on 
political  economy,  170-175, 182- 


INDEX. 


535 


184;  Smith  avoids  antagonizing, 
182;  true  beneficiaries  of  pro- 
tectionism, 175-176;  invalidity 
of  their  right  to  land  values, 
277-278 ;  compensation  to,  Mill, 
137-138,  Spencer,  192-193, 
Dove,  192-193 ;  cannot  contrib- 
ute to  production,  409-410; 
their  income  and  the  laws  of 
distribution,  460-461. 

Language,  how  it  grows  in  copi- 
ousness, flexibility  and  beauty, 
274. 

Laughlin,  definition  of  wealth, 
123. 

Laveleye,De,  definition  of  wealth, 
122. 

Law,  science  deals  with  natural, 
not  human,  58-60;  the  funda- 
mental, of  political  economy, 
86-91, 99,  254, 268,  332  ;  natural, 
not  human,  the  subject  of  po- 
litical economy,  61-64,  76-77, 
426,428-429 ;  natural  law  always 
the  same,  428-429,  435-436;  of 
nature,  what  it  is,  435-436, 443, 
452 ;  Mill's  definition,  443 ;  the 
will  behind  it,  435-436;  common 
perception  of  natural,  in  distri- 
bution, 440^49,  Mill's  admis- 
sion, 440-441,  443;  sequence, 
consequence  and  natural,  44- 
57,  440-443;  human  law  con- 
fused with  natural,  in  distri- 
bution, 440-441,  443,  448-449; 
inflexibility  of,  in  distribution, 
443-444. 

Lawyers,  and  real  property,  461. 

Leverson,  M.  R.,  definition  of 
wealth,  122. 

Leviathan,  Hobbes's,  22,  25-26, 
27;  the  Greater,  22-23,  27-28, 
35-36,  118,  395-396,  399-400, 
428. 

Logic.     See  Eeason. 

Macdonald,  D.  C.,  Ogilvie  on 
natural  rights,  185-186. 

Machinery  .in  civilization,  379. 

Macleod,  H.  D.,  definition  of 
wealth,  122;  objects  to  Smith's 
definition,  146;  his  confusion, 


196-197;  definition  of  econom- 
ics, 129  ;  account  of  the  Physio- 
crats' views,  155-158. 

Macvane,  definition  of  wealth, 
123. 

Maecenas,  his  name  in  Horace's 
odes,  310. 

Malthus,  definition  of  wealth, 
121;  objects  to  Smith's  defini- 
tion, 146. 

Malthusian  theory,  173-174,  183, 
333-334;  alleged  law  of  dimin- 
ishing returns  in  agriculture 
and,  335,  336,  337-338. 

Man,  bis  place  and  powers,  11-18, 
351-352 ;  how  extended  in  civ- 
ilization, 19-23,  29-43,  91;  his 
earliest  knowledge  of  his  habi- 
tat, 11,  and  how  it  grows,  11-14 ; 
his  physical  nature,  13-18 ;  his 
resemblance  to  other  animals, 
13-14,  85,  291,  and  distinction 
from  them,  11-18,  19,  29,  36, 
51,  53,  56,  59,  77,  82,  85,  287, 
291-292,  397-399  ;  but  a  passing 
manifestation  of  matter  and 
energy,  13-14 ;  his  spiritual  na- 
ture, 14-18,  29,  37-38,  84-85, 
287,  307 ;  the  social  animal,  21 ; 
the  artificial,  in  the  body  politic 
called  Leviathan,  22,  25-26, 
27,  the  still  greater,  in  the 
body  economic  called  the 
Greater  Leviathan,  22-23,  27, 
36,  118,  395-396,  399,  428;  his 
belief  in  immortality,  34;  res- 
urrection from  the  dead,  312 ; 
distinction  of  the  civilized,  from 
the  savage,  39-43;  as  compre- 
hended in  and  as  apart  from 
nature,  47-48,  84-85;  his  laws 
distinct  from  political  econ- 
omy, 58-61;  his  actions 
prompted  by  desire,  18,  81-82, 
the  satisfaction  of  which  is  the 
fundamental  law  of  political 
economy,  86-91,  99,  254,  268, 
332 ;  he  could  not  exist  without 
desire,  83;  his  subjective  and 
objective,  material  and  imma- 
terial desires,  83-85;  in  the 
hierarchy  of  life,  85;  a  pro- 


536 


INDEX. 


ducer,  not  a  creator,  324;  his 
dependence  on  land,  77,  351- 
352 ;  subject  to  the  spacial  law, 
363-364 ;  his  full  powers  to  be 
utilized  only  in  independent 
action,  392-396;  his  conscious 
and  unconscious  intelligence, 
395;  the  exchanging  animal, 
398-399;  the  natural  order  re- 
quires equality  with  his  fel- 
lows, 256;  civilization  makes 
no  change  in  him  as  man,  507 ; 
trust  or  credit  coeval  with  his 
first  appearance,  510-511. 

Marginal  utilities.     See  Utilities. 

Mark  Twain,  Esquimau  story, 
305. 

Marshall,  Alfred,  definition  of 
wealth,  125-126;  and  classifica- 
tion of  goods,  283-284;  teach- 
ings of  Austrian  school,  208- 
209 ;  alleged  law  of  diminish- 
ing returns  in  agriculture,  336. 

Marx,  Karl,  does  not  define 
wealth,  124;  his  teachings,  197. 

Mason,  Alfred  B.,  definition  of 
political  economy,  61-63;  defi- 
nition of  wealth,  122. 

Mathematics,  and  political  econ- 
omy, 128rc.,  129-130. 

Matter,  what  it  is  in  philosophy, 
9 ;  one  of  the  three  elements  or 
factors  of  the  world,  9,  77 ;  its 
correlative  elements,  9-10 ;  man 
but  a  passing  manifestation  of, 
13-14,  47 ;  incases  man's  spirit 
or  soul,  47,  84-85 ;  necessity  of 
man's  freedom  of  access  to,  79, 
351-352. 

McCulloch,  definition  of  wealth, 
121;  objects  to  Smith's,  146. 

Memory,  subconscious,  store- 
house of  that  knowledge  called 
skill,  40-41,  377. 

Menger,  teachings  of  Austrian 
school,  208-209. 

Mercantile  system.  See  Protec- 
tionism. 

Metaphysics,  proper  meaning  of, 
339 ;  effect  on  political  econ- 
omy of  confusions  in,  340,  and 
on  the  higher  philosophy,  340 ; 


of  space  and  time,  339-350; 
danger  of  thinking  of  words  as 
things,  340-341 ;  words  as  used 
by  Plato  and  the  Theosophists, 
341;  space  and  time  not  con- 
ceptions of  things,  but  of  rela- 
tions of  things,  341-343,  and 
cannot  have  independent  be- 
ginning or  ending,  343-344; 
space  and  time  as  used  by 
poets  and  religious  teachers, 

344,  and  by  philosophers,  344- 

345,  350;  Kant,   345-346,  350; 
Schopenhauer,     346-348,     350; 
mysteries  and  antinomies,  348- 
349 ;  human  reason  and  eternal 
reason,    349-350;    "the    abso- 
lute,"    "the     unconditioned," 
"  the  unknowable,"  350. 

Michelet,  consecrated  absurdities. 
140. 

Mill,  John  Stuart,  implication  of 
God  in  term  "Law  of  Nature," 
55 ;  definition  of  wealth,  122 ;  na- 
ture of  wealth,  137-138 ;  delu- 
sions, 133-134, 137 ;  his  intellec- 
tual honesty,  137,  460;  careful 
education  and  abilities,  432-433, 
455,  461 ;  condemnation  of  land 
monopoly,  137-138;  compensa- 
tion, 137-138 ;  unearned  incre- 
ment, 150, 195 ;  course  of  devel- 
opment of  political  economy, 
176;  his  early  influence  on 
Henry  George,  201 ;  value,  215- 
219,  223 ;  alleged  law  of  dimin- 
ishing returns  in  agriculture, 
335-337;  contention  that  laws 
of  distribution  are  human  laws, 
430-435,  440^43,  455,  459,  and 
that  produce  distributes  itself, 
447-448;  utilitarianism,  455- 
459,  461 ;  confusion  as  to  prop- 
erty, 462-469;  confounds  the 
different  meanings  of  land,  463- 
466. 

Mirabeau.    See  Physiocrats. 

Money,  confusion  from  using  it  as 
a  common  measure  of  value, 
226-227 ;  how  it  gets  its  power 
as  a  medium  of  exchange,  266- 
267;  confusion  as  to  the  word 


INDEX. 


537 


has  strengthened  protection- 
ism, 280-281,  493w.;  when  capi- 
tal and  when  not,  298-299 ;  when 
wealth  and  when  not,  299w.,  313- 
314;  definition  of,  in  "  John- 
son's Encyclopedia,"  480 ;  true 
definition  of,  494,  495;  confu- 
sion as  to,  479-481 ;  due  largely 
to  pressure  of  personal  inter- 
ests, 480,  but  among  economists 
to  confusion  as  to  wealth  and 
value,  480-481 ;  the  medium  of 
exchange  and  measure  of  value, 
481,  495-503 ;  common  use  of  the 
word,  275-276 ;  common  under- 
standing of,  482-494 ;  use  of,  to 
exchange  for  other  things,  482- 
484;  Smith's  sense  of  buying 
and  selling,  484 ;  present  mean- 
ing of,  as  distinguished  from 
barter,  trade  or  exchange,  484- 
485;  not  more  valuable  than 
other  things,  but  more  readily 
exchangeable,  485-487, 495-496 ; 
exchangeability  its  essential 
characteristic,  487,  491-494 ; 
exchanges  without,  485-487 ; 
checks  not,  487  ;  different  coun- 
tries have  different,  488;  not 
made  by  governmental  fiat,  488- 
490,  491;  does  not  necessarily 
consist  of  gold  or  silver,  489- 
490,  491,  or  need  intrinsic  value, 
489-491 ;  no  universal,  490-494 ; 
its  primary  and  secondary  qual- 
ities, 495 ;  tendency  to  overesti- 
mate its  importance,  504-506; 
credit  used  before,  506, 510-511 ; 
most  important  use  of  money 
to-day,  511 ;  the  representative 
of  value,  526 ;  genesis  of,  512- 
525 ;  not  an  invention,  but  a  de- 
velopment of  civilization,  512 ; 
grows  with  growth  of  ex- 
changes, 512 ;  cattle  used  as, 
513n.-514w.;  first  purpose  of 
coinage  of,  513-515 ;  American 
trade  dollar,  515-516;  lessen- 
ing uses  of  commodity  and  ex- 
tensions of  credit,  516-517; 
two  elements  in  exchange  value 
of  metal,  518 ;  intrinsic  value 


in,  518-528 ;  seigniorage  in,  518- 
519 ;  Eicardo  on  paper,  520 ; 
may  be  useful  though  intrinsic 
value  be  eliminated,  520,  523- 
525 ;  debasement  immediately 
felt  in  first  coined,  or  commod- 
ity, 520-523 ;  the  two  kinds  of, 
526-528. 

Monopoly,  land,  based  on  force 
and  fraud,  137 ;  condemnation 
of,  by  Mill,  137-138;  increase 
in  value  of,  not  to  common  in- 
terest, 268-269;  value  of,  not 
wealth,  277-278. 

Montchretien,  Antoine  de,  first 
used  term  political  economy, 
67. 

Montesquieu,  on  justice,  453. 

Mortgages,  not  wealth,  277;  not 
capital,  296. 

Mystery,  theologians'  reference  to 
space  and  time,  344-346,  348. 

Natural  opportunities, not  wealth. 
277-278. 

Natural  order,  natural  laws  be- 
long to  the,  60 ;  Physiocrats  and 
the,  149-159,  164 ;  single  tax  in 
the,  145,  159,  165-166,  167; 
equality  of  men  intent  of,  256 ; 
laws  of  distribution  and  the, 
428. 

Natural  rights.     See  Eights. 

Nature,  how  manifested  in  the 
universe,  man  and  the  animals, 
11-18,  51-54;  term  law  of,  how 
derived,  46-54;  word  law  as 
applied  to,  54-55 ;  meaning  of 
term  law  of,  55-57,  and  Mill's 
definition,  443 ;  sequence,  con- 
sequence and  laws  of,  44-57, 
435-436,  437,  440-443;  Mill's 
confusion  of  human  laws  with 
laws  of,  440-443;  laws  of,  and 
political  economy,  58-61,  76-77; 
its  essential  distinction  from 
God,  54 ;  implication  of  God  in 
word,  55-57 ;  man's  action  sub- 
ject to  laws  of,  80 ;  the  passive 
factor  or  element  in  political 
economy,  77;  interpreted  by 
man's  reason  by  assuming  rea- 


638 


INDEX. 


son  in,  75 ;  fundamental  law  of 
political  economy  a  law  of, 
87-88. 

Needs,  how  distinguished  from 
other  human  desires,  82-83, 247; 
order  of,  85. 

Newcomb,  definition  of  wealth, 
123. 

Newton,  anecdote  of,  395. 

Nicholson,  J.  Shield,  does  not  de- 
fine wealth,  126-127. 

Nirvana,  in  the  philosophy  of 
negation,  347-348. 

Obligation,  value  from,  what  it  is, 
257-269, 309 ;  source  of,  271,  272 ; 
it  does  not  increase  wealth,  272, 
and  has  to  do  only  with  distri- 
bution, 272;  permanence  of, 
309-312. 

Ogilvie.  William,  natural  rights. 
185-186. 

"Our  Land  and  Land  Policy," 
philosophy  of  the  natural  order, 
163-164 ;  when  and  how  written, 
201. 

Palgrave,  E.  H.  Inglis,  "  Diction- 
ary of  Political  Economy,"  206. 

Perception,  and  non-perception, 
352-353. 

Perry,  A.  L.,  dispenses  with  the 
term  wealth,  124-125,  130. 

Philosophy,  meaning  of  term,  9; 
how  the  teaching  of,  is  warped, 
138-139;  that  teaching  of  the 
extinction  of  desire,  83,  347- 
348 ;  that  concerned  with  grati- 
fying material  needs,  85 ;  that 
of  the  natural  order  taught  by 
the  Physiocrats,  149-159,  164; 
that  of  the  natural  order  known 
as  the  single  tax,  145,  159,  165- 
166,  167;  that  of  the  natural 
order  in  "  Our  Land  and  Land 
Policy,"  163-164;  that  of  the 
natural  order  and  Smith,  164; 
Christ's,  and  a  true  political 
economy,  304-307. 

Physiocrats,  their  use  of  the  term 
"  political  economy,"  67 ;  origin 
and  meaning  of  their  name, 


145n.;  who  they  were  and  what 
they  held,  148-159;  cause  of 
their  confusion,  151-152,  354- 
355 ;  real  free  traders,  152-153, 
165;  originated  term  "Laissez 
faire,  laissez  aller,"  153 ;  ante- 
dated and  surpassed  Ricardo, 
154-155;  explanation  of  their 
rent  doctrine,  154-155;  their 
views  explained  in  "  Progress 
and  Poverty,"  154-155;  Mac- 
leod's  account  of  their  views, 
155-158 ;  their  day  of  hope  and 
faU,  159,  168-169;  overthrown 
by  a  special  interest,  154;  as 
single  taxers,  145, 153,  159, 165- 
166,  168 ;  as  described  by  Adam 
Smith,  67,  145;  his  relations 
with  them,  160-169,  171,  173; 
intended  dedication  to  Quesnay, 
161-162 ;  resemblance  of  views, 
162-165,  and  differences,  165- 
169;  men  who  followed,  186- 
199;  value,  220;  land  not 
wealth,  265-266;  definition  of 
wealth,  270-271. 

Plato,  world  of  ideas,  79 ;  trick  of 
verbal  contradiction,  340-341. 

Playfair,  William,  apology  for 
Smith's  radicalism,  173. 

Plutology,  as  a  substitute  for 
political  economy,  128-129. 

Political  economy,  its  practical 
importance,  xxxi.-xxxiv.,  81-85, 
280;  how  it  must  be  studied, 
xxxi.-xxxix.,  76,  481;  purpose 
of,  xxxi.-xxxii.,  117;  definition 
of,  3,  67, 104, 115, 127, 301, 304,  by 
Mason  and  Lalor,  61-62 ;  mean- 
ing, units  and  scope  of,  65-73, 
276 ;  origin  of  term,  65-67 ;  con- 
cerned with  natural,  not  human 
laws,  58-64,  76-77,  426,  428-429, 
and  these  laws  invariable,  481 ; 
province  of,  67-68,  303;  ele- 
ments of,  74-80 ;  its  three  grand 
divisions,  421;  can  go  no  further 
than  distribution,  428-429 ;  fun- 
damental law  of,  86-91,  99,  254, 
268,  332 ;  primary  postulate  of, 
90-91,  99, 401,  512  ;  central  prin- 
ciple of,  150 ;  methods  of,  29-30, 


INDEX. 


539 


92-100;  as  science  and  as  art, 
101-104;  body  politic  and, 
xxxiv.,  67-68,  73,  428;  body 
economic  and,  68-73 ;  institu- 
tions of  learning  and,  xxxii.- 
xxxv.,  3,  61-64,  92, 113,  119-130, 
135,  140,  174-175,  176,  180-181, 
183,  203-209,  233-234,  273,  281, 
355 ;  theology  and,  xxxiv. ;  not 
properly  a  moral  or  ethical  sci- 
ence, 72-73;  selfishness  and, 
88-91,  99;  riches  and  poverty 
in,  304-307;  confusions  in  its 
current  teachings,  xxxii.-xxxv., 
61-64,  75,  78,  88,  101-104,  115, 
117-130,  131-142,  176-177,  180- 
181,  183,  196-197,  203,  210-211, 
212,  213-222,  226-234,  235-240, 
243-245,  247,  252,  273,  326,  333, 
334,  339-340,  371,  400-401,  406- 
407,  415,  429,  430-439,  440-443, 
448-449,  450-451,  459,  460-469 ; 
the  "dismal  science,"  88,  151, 
174-175;  study  of,  affected  by 
special  interests,  xxxiii.-xxxv., 
130-142,  167-168,  169,  171-176, 
182-184,  207,  273-274,  333,  447, 
461;  as  to  history  of,  115, 120w., 
131-142,  169,  170-181,  182-199, 
200-209,  271 ;  Physiocrats  first 
developers  of,  148-150 ;  Smith's 
influence  on,  170-181,  182; 
breakdown  of  Smith's,  176- 
181 ;  German  influence  on,  195- 
196,  197-199,  208-209,  283-284, 
345,  461;  Austrian  school  of, 
124, 208-209,  215,  218, 252 ;  Say's 
hopes  for,  130,  177-178,  180; 
Cairnes's  predictions,  179-181 ; 
why  it  considers  only  wealth 
and  not  all  satisfactions,  301- 
303 ;  its  object-noun,  127,  181, 
301 ;  wealth  in,  and  in  individual 
economy,  118-119,  276;  mean- 
ing of  wealth  in,  270-284,  293, 
296,  340,  357 ;  meaning  of  value 
in,  224-225;  statistics  and,120w., 
181;  mathematics  and,  128w., 
129-130 ;  metaphysics  and,  339- 
340 ;  catallactics  and  plutology 
as  substitutes  for,  128-129; 
economics  and,  128-130 ;  turned 


against  protectionism  by  Smith, 
182 ;  afterwards  made  to  favor 
protectionism,  195-196 ;  conflict 
of  socialism  with  a  real,  198, 
403;  historical  school  of,  206, 
448;  classical  school  of,  208, 
448;  death  of  old,  120rc.,  205- 
206 ;  Christ's  philosophy  and  a 
true,  306-307 ;  places  of  trans- 
portation and  exchange  in,  325- 
326,  400-401,  425-426;  proper 
meaning  of  word  land  in,  352, 
408-409,  and  of  production,  323- 
326,  357,  and  of  cooperation, 
372,  and  of  labor,  411-412,  and 
of  distribution,  428 ;  not  con- 
cerned with  consumption,  426, 
nor  taxation,  426;  absence  of 
scientific  method  in  current, 
448. 

Poor,  cannot  be  under  a  true  po- 
litical economy,  304-307;  why 
Christ  sympathized  with  the. 
306-307. 

Population,  theory  of.  See  Mal- 
thusian  Theory. 

Possessions,  unjust,  304-307. 

Poverty,  Smith's  silence  on  cause 
of,  183 ;  cannot  exist  under  a 
true  political  economy,  304-307. 

Price,  current  teachings  as  to, 
227;  Adam  Smith  on,  229,  503; 
treated  as  an  economic  term, 
229w./  attempts  to  regulate,  446. 

Privilege,  special,  and  value  from 
obligation,  262-267,  does  not 
increase  the  sum  of  wealth, 
277-278;  not  capital,  296-297. 
See  Interests,  Special. 

Production,  began  with  man,  35- 
36 ;  based  on  natural  law,  461 ; 
meaning  of,  323-326,  327,  357 ; 
what  it  involves,  327;  differ- 
ence from  creation,  323-324; 
other  than  of  wealth,  302-303, 
324-325  ;  alleged  law  of  dimin- 
ishing returns  in  agriculture, 
174,  335-338;  spacial  law  re- 
lates to  all,  340,  355-356,  357- 
364,  368 ;  all  modes  of,  require 
time,  340,  365-370;  cost  of,  a 
measure  of  value,  253-254; 


540 


INDEX. 


value  from,  257-269,  271,  272, 
and  in  what  it  consists,  308, 
and  its  permanence,  309-312; 
place  of  cooperation  in,  332, 
426,  and  its  meaning,  371 ;  the 
two  ways  in  which  cooperation 
increases,  371-381;  the  two 
kinds  of  cooperation  in,  382- 
396 ;  thought  the  originating 
element  in,  391,  and  cannot  be 
fused,  391-392;  directed  coop- 
eration utilizes  the  sum  of 
men's  physical  powers  in,  392, 
but  unconscious  cooperation 
utilizes  the  sum  of  their  intel- 
lects as  well,  392-393;  man's 
full  powers  to  be  utilized  in, 
only  in  independent  action, 
393-396;  how  slavery  checks, 
393;  the  Greater  Leviathan 
and,  395-396 ;  transportation 
included  in,  326, 426 ;  exchange 
also,  299,  326,  426,  mistakes 
as  to  this,  326,  400-401;  the 
three  modes,  327-332,  359,  400, 
414;  adapting  in,  327-330,  332, 
353-354,  358 ;  growing  in,  330- 
331,  353-354,  357-358 ;  exchang- 
ing in,  331-332,  354;  office 
of  exchange  in,  397  -  401 ; 
office  of  competition  in,  402- 
403;  names  and  order  of  the 
three  factors  of,  405-407,  444; 
land  the  first  factor  in,  77,  279, 
408-410 ;  labor  the  second  fac- 
tor in,  77,  80,  279,  411-412; 
capital  the  third  factor  in,  413- 
415 ;  appropriation  has  no  place 
in,  415;  how  related  to  dis- 
tribution, 426-427,  437-439;  dis- 
tribution affected  through,  446- 
447,  453;  division  into  three 
elements  of,  444;  real  differ- 
ence between  laws  of  distribu- 
tion and,  450-453. 

Produit  net,  meaning  and  signifi- 
cance of,  150-151. 

"  Progress  and  Poverty,"  and  the 
landowner's  prophecy,  170-171 ; 
and  validity  of  property,  184, 
240;  Spencer's  "  Social  Stat- 
ics," 189 ;  brief  history  of,  200- 


201,  203 ;  what  it  contains,  201- 
202 ;  effect  on  scholastic  politi- 
cal economy,  203-209;  fixed 
meaning  of  wealth  and  capital, 
211,  270-271,  298-300;  another 
method  of  determining  mean- 
ing of  wealth,  271-272;  the 
Malthusian  theory  and,  334; 
rise  of  the  single  taxers  and, 
355,  356. 

Property,  its  validity  in  the  old 
political  economy,  184;  first 
really  questioned  in  ''Progress 
and  Poverty,"  184;  in  land 
without  moral  sanction,  265; 
efforts  of  special  interests  to 
prevent  question  of,  273-274; 
laws  of  distribution  determine 
ownership  of,  454 ;  based  on 
natural  law,  454-459,  460-461 ; 
Mill's  recognition  and  error, 
454-459 ;  causes  of  confusion  as 
to,  460-469 ;  pre-assumption 
that  land  is,  460-461 ;  essential 
principle  of,  461-462;  where 
Mill  is  wrong,  462^69. 

Protectionism,  genesis  of,  134; 
Smith's  attack  on,  171-172,  175, 
182;  repeal  of  English  corn- 
laws,  176,  the  contest  revealing 
true  beneficiaries  of,  175-176; 
merchants  and  manufacturers 
not  ultimate  beneficiaries  of, 
175-176;  selfishness  and,  196; 
a  form  of  socialism,  197 ;  effect 
of,  on  political  economy  in 
Germany,  195,  and  in  the 
United  States,  179,  196,  207; 
strengthened  by  confusion  as 
to  money,  280-281,  493n.;  value 
from  obligation  and,  263,  264- 
265,  not  to  common  interest, 
268-269  ;  competition  and,  402- 
403. 

Psychological  school.  See  Aus- 
trian School. 

Pun,  what  it  implies,  274. 

Quesnay,  Francois,  leader  of  the 
Physiocrats,  145;  who  he  was 
and  what  he  taught,  148-159; 
Smith's  relations  with,  160- 


INDEX. 


541 


162;  resemblance  of  George's 
views,  163;  agriculture  the 
only  productive  occupation, 
354-355. 

Quincey,  Thomas  De,  value, 
215-216. 

Eae,  definition  of  wealth,  121. 

Eeason,  distinguishes  man  from 
the  animals,  14-18,  29,  31-37, 
51,  56,  77-78,  85,  397-399  ;  welds 
men  into  the  social  organism 
or  economic  body,  19-24,  399; 
essential  qualities  of,  29-30,  33, 
45-16;  it  impels  to  exchange, 
35-37 ;  its  process  of  operation, 
29-30,  47-48,  92-100;  the  Ego 
and,  47;  impels  man  to  seek 
causal  relations,  56-57,  79 ;  how 
it  apprehends  the  world,  77, 
85;  how  it  interprets  nature, 
75 ;  how  it  posits  God,  79,  403 ; 
instinct  and,  36-37,  291-292, 
397-399 ;  metaphysics,  339 ; 
mysteries,  344-346, 348 ;  antino- 
mies, 345-346,  348;  pure,  346; 
Hegel  and  Schopenhauer,  208- 
209;  Kant  and  Schopenhauer, 
346-348,  350;  the  human,  one 
and  to  be  relied  on,  349-350; 
lunacy  and  madness  do  not 
affect,  349  ;  human  and  eternal, 
344-350. 

Reasoning,  the  three  methods 
used  in  political  economy,  92- 
100  ;  power  of  special  interests 
to  pervert,  135-136;  Bacon  on 
the  right  way  of,  139. 

Reciprocity,  exalted  meaning 
given  by  Confucius,  306. 

Rent,  the  central  principle  of 
political  economy,  150  ;  produit 
net,  150 ;  unearned  increment, 
150;  proposition  of  the  impot 
unique  or  single  tax,  150-151; 
Ricardo's  formulation  of  the 
law,  154,  Physiocrats  antici- 
pated and  surpassed  him,  150- 
151,  154-155 ;  law  of,  treated  in 
"Progress  and  Poverty,"  202; 
Smith's  theory  of,  173-174,  he 
was  not  clear  as  to,  183 ;  theory 


of,  and  diminishing  returns  in 
agriculture,  333-334 ;  related  to 
agriculture  in  current  teaching, 
356 ;  one  of  the  three  laws  of 
distribution,  444 ;  futile  at- 
tempts to  regulate,  445-446. 

Resurrection,  relation  of  value 
from  obligation,  309-312. 

Ricardo,  does  not  define  wealth, 
124;  rent  doctrine  and  the 
Physiocrats,  154-155;  law  of 
rent,  183  ;  corrects  Smith  as  to 
rent,  173-174;  restriction  of 
meaning  of  word  land,  255-256 ; 
of  paper  money  and  seignior- 
age, 520. 

Rich,  Christianity  made  to  soothe 
the,  174 ;  cannot  be  any,  under 
a  true  political  economy,  304- 
307;  Christ's  philosophy,  306- 
307. 

Right,  no  business  of  political 
economy  to  explain  difference 
between  wrong  and,  73.  See 
Justice. 

Rights,  natural,  the  Physiocrats, 
149-159;  Smith,  164-165,  172; 
"  Our  Land  and  Land  Policy," 
201;  "  Progress  and  Poverty," 
201-203;  Spence,  185;  Ogilvie, 
185-186;  Chalmers,  186-187; 
Wakefield,  187-188;  Spencer, 
188-189,  191-193;  Dove,  189- 
194 ;  Bisset,  194. 

Rogers,  Thorold,  does  not  define 
wealth,  124. 

Ruskin,  John,  repugnance  to 
"dismal  science,"  88;  defini- 
tion of  wealth,  123-124. 

Satisfactions,  of  desires  and,  81- 
85,  301-303,  324-325;  wealth 
cannot  be  reduced  to,  289.  See 
Desire. 

Say,  Jean  Baptiste,  definition  of 
wealth,  121 ;  hopes  for  political 
economy,  130,  177-178,  180. 

Schopenhauer,  of  extinction  of 
desire,  83;  Hegel,  208-209; 
Kant,  346-348;  the  world  as 
will  and  idea,  347-348,  350. 

Science,  the  knowledge  properly 


542 


INDEX. 


called,  58-64 ;  meaning  of  word, 
58-59;  deals  with  natural,  not 
human  laws,  59-64,  426. 

Selfishness,  its  place  in  the  cur- 
rent and  in  the  true  political 
economy,  88-91,  99;  and  pro- 
tectionism, 196. 

Senior,  definition  of  wealth,  121- 
122. 

Sequence,  meaning  of,  45 ;  invari- 
able or  consequence,  45-46,  55- 
56,  80,  435-436 ;  of  laws  of  na- 
ture, 44-57,  80,  435-436,  437, 
440-443;  in  the  realm  of  spirit, 
366-367;  Mill  confuses  it  with 
consequence,  440-443. 

Service,  two  ways  of  satisfying 
human  desire,  72-73 ;  confusion 
with  the  word  labor,  244 ;  wealth 
essentially  a  stored  and  trans- 
ferable, 289-292 ;  direct  and  in- 
direct, 290;  natural  or  normal 
line  in  the  possession  or  enjoy- 
ment of,  306 ;  barter  and,  505. 

Shadwell,  definition  of  wealth, 
122. 

Shakespeare,  boast  of  his  lasting 
verse,  309-310. 

Skill,  the  incommunicable  know- 
ledge called,  40-41,  43,  59. 

Slavery,  effect  of,  on  defining 
wealth,  131-133;  effect  on 
thought,  141-142;  value  of  ob- 
ligation and,  258-259,  263  ;  debt 
is,  262;  economic  wealth  and, 
277-278;  capital  and,  296-297; 
production  checked  by,  393 ; 
exchange  and,  400. 

Smart,  William,  teachings  of  the 
Austrian  school,  208-209. 

Smith,  Adam,  meaning  of  term 
"  political  economy,"  66-67 ;  im- 
portance of  his  "  Wealth  of 
Nations,"  89;  the  deductive 
method,  92;  nature  of  term 
wealth,  120,  143-147,  164-165, 
229-230,  279-280,  where  he  was 
confused,  183,  210, 271,  279 ;  cat- 
tle used  as  money,  513n.-514n.; 
not  clear  as  to  capital,  wages, 
or  rent,  183 ;  value  in  use 
and  value  in  exchange,  213- 


225 ;  did  not  confine  wealth  to 
money  or  the  precious  metals, 
279 ;  exchange  value  a  relation 
to  exertion,  228-234,  267-268; 
price,  229,  503 ;  confusion  as  to 
causes  of  value,  259-260,  265; 
the  measure  of  value,  497, 
503 ;  error  in  regarding  land  as 
property,  461 ;  error  as  to  diffi- 
culty of  barter,  508-510;  de- 
scription of  Physiocrats,  67, 
145,  relations  with  them,  160- 
169,  171,  173,  resemblance  of 
views,  162-165,  independence 
of  them,  165-169,  as  evidenced 
by  "  Moral  Sentiments/'  162; 
intended  dedication  of  "  Wealth 
of  Nations"  to  Quesnay,  161- 
162;  his  work  on  the  "  Wealth 
of  Nations,"  160-161;  Dugald 
Stewart  and,  161-162,  172 ;  ad- 
vocated the  natural  order,  164 ; 
a  free  trader,  164,  165,  but 
failed  to  appreciate  the  single 
tax,  165-166,  167-168 ;  his  pru- 
dence as  an  individual  and  a 
philosopher,  167-169,  182;  did 
not  venture  to  show  cause  of 
poverty,  183 ;  James  on  his 
place  in  political  economy,  169, 
and  Ingram's  view,  205-206 ;  his 
influence  on  the  science,  170- 
181,  182;  addressed  the  cul- 
tured, 170 ;  backed  by  the 
landed  interest,  171-175,  182, 
yet  suspected  of  radicalism, 
171-173;  against  protectionism, 
164,  165,  171-172,  175,  182; 
weakness  of  his  free-trade 
views,  182-183 ;  mistaken  as  to 
cause  of  rent,  173-174 ;  theory 
of  wages,  167,  174,  233 ;  division 
of  labor,  182,  372,  374,  380 ;  the 
theory  of  population,  174 ; 
breakdown  of  his  political 
economy,  176-181,  200-209 ;  il- 
logical teachings  of,  182-183; 
selfishness  in  political  econ- 
omy, 89-90 ;  his  greatness,  461. 
Socialism,  its  proposals,  197-199 ; 
Karl  Marx's  teachings,  197; 
trade-unionism,  197,  199;  pro- 


INDEX. 


543 


tectionism,  197,  402;  conflict 
with  true  political  economy, 
198,  403;  without  religion  and 
philosophy,  198;  against  com- 
petition, 402-403 ;  that  in  Peru, 
198 ;  its  great  defect,  391 ;  the 
originating  element  in  produc- 
tion is  men's  thought,  391, 
which  cannot  be  combined  or 
fused,  391-392;  directed  co- 
operation utilizes  the  sum  of 
men's  physical  powers,  392, 
but  independent  action  utilizes 
the  sum  of  their  intellects  as 
well,  392-393;  effect  of  subor- 
dination seen  in  slavery,  393; 
why  socialism  is  impossible, 
393-396. 

"Social  Statics,"  and  natural 
rights,  188-189,  191-193. 

Socrates,  Plato's  trick  of  verbal 
contradiction,  340-341. 

Soul.     See  Spirit. 

Space,  and  metaphysics,  340-348 ; 
and  theology,  344-346,  348; 
what  it  is  in  political  economy, 
351-352;  confusion  of  the  law 
of,  with  agriculture,  174,  351- 
356,  whereas  it  relates  to  all 
production,  355,  357-364;  defi- 
nition of,  365 ;  apprehension  of 
it  objective  and  different  from 
that  of  time,  365-367. 

Species,  development  of,  333-334. 

Spence,  Thomas,  on  natural 
rights,  185. 

Spencer,  Herbert,  of  dogs,  33 n.; 
natural  rights,  188-189,  191- 
193;  his  recantation,  189;  and 
"Progress  and  Poverty,"  189; 
and  UA  Perplexed  Philoso- 
pher," 189 ;  gives  postulates  of 
the  single  tax,  192;  a  free 
trader,  192 ;  his  doctrines  com- 
pared with  Dove's,  191-193; 
compensation,  192-193. 

Spirit,  what  it  is  in  philosophy, 
9 ;  its  correlative  elements,  9- 
10 ;  priority  of,  10 ;  its  place  in 
the  world,  77, 79, 452 ;  its  place  in 
civilization,  35,  37-38 ;  in  man, 
10, 47-48, 309 ;  God  the  creative, 


10,  54,  55,  56-57,  79,  174,  452; 
Plato  and  the  world  of  ideas, 
79;  when  it  may  have  know- 
ledge of  spirit,  84;  dependent 
on  matter,  84-85, 367 ;  good  and 
evil  in  it,  not  in  external  things, 
91 ;  value  of  obligation  and,  309- 
312 ;  the  originating  element  in 
production,  323-324,  391-392; 
sequence  or  time  in  the  realm 
of,  366-367 ;  laws  of  nature  that 
relate  to,  437-438;  justice  can 
relate  only  to,  451-452. 

Statistics,  and  political  economy, 
120w.,  181. 

Stewart,  Dugald,  Adam  Smith, 
161-162,  172. 

Subsistence,  man's  power  of  in- 
creasing his,  17-18. 

Synthesis,  its  meaning,  29. 

Tariff.     See  Protectionism. 

Tax,  single,  the  Physiocrats  and 
the,  145,  153,  159,  165-166,  168 ; 
meaning  of,  150-151;  impot 
unique.  150-151;  and  the  nat- 
ural order,  145,  159,  165-166, 
167;  Herbert  Spencer  on  pos- 
tulates of,  192;  rise  of  the 
movement  for  the,  355;  chief 
difficulty  of  propaganda  in  the 
United  States,  356. 

Taxation,  not  concerned  with  po- 
litical economy,  426;  what  is 
meant  by  single  tax,  151. 

Taxes,  artificial  values  from  them 
not  to  common  interest,  268- 
269. 

Teleological  argument,  50. 

Theology,  relation  to  current  po- 
litical economy,  xxxiv. ;  space 
and  time  as  mysteries  in,  344- 
346,  348. 

Theosophy,  the  trick  of  verbal 
contradiction,  341. 

Thompson,  Eobert  Ellis,  old  po- 
litical economy  dead,  207. 

Time,  and  metaphysics,  340-348 ; 
and  theology,  344-346,  348 ;  defi- 
nition of,  365 ;  apprehension  of, 
subjective  and  different  from 
space,  366;  relation  to  spirits 


544 


INDEX. 


and  to  creation,  366, 368 ;  all  pro- 
duction requires,  368-370 ;  con- 
centration of  labor  in,  369-370. 

Tools,  their  origin,  36. 

Torrens,  definition  of  wealth,  121. 

Trade,  at  the  base  of  civilization, 
35-37. 

Trade-unionism,  and  socialism, 
197,  199. 

Transportation,  included  in  pro- 
duction, 326, 426;  not  concerned 
with  distribution,  326,  425. 

Turgot,  on  the  art  of  darkening 
things  to  the  mind,  63-64.  See 
Physiocrats. 

Ulpian,  definition  of  wealth,  132. 

Utilitarianism,  how  it  befogged 
Mill,  455-459,  461. 

Utilities,  marginal,  value  as  de- 
rived from,  218,  237. 

Value,  confusions  as  to  meaning 
of,  115,  210-211,  214-225,  226- 
234;  Karl  Marx  and,  197;  in 
use  and  in  exchange,  212- 
225 ;  original  meaning  of  word, 
213,  as  used  by  Smith,  213-214, 
Mill's  objection,  214-216,  and 
his  confusion,  217-225 ;  real 
meaning  of,  226-234,  249,  250- 
254,  264,  467;  not  a  relation 
of  proportion,  226-228,  236, 
267,  but  a  relation  to  exer- 
tion, 228-234,  235-249,  253-254, 
267-269;  does  not  come  from 
exchangeability  but  the  re- 
verse, 236,  247-248;  causal  re- 
lationship to  exchangeability, 
247;  competition  in  determin- 
ing, 251,  253 ;  the  two  sources 
of,  249,  257-269,  270-284,  526; 
increase  of  wealth  not  involved 
by,  257-269 ;  that  from  produc- 
tion is  wealth,  270-284;  that 
from  obligation  relates  alone 
to  distribution,  272,  and  is  no 
part  of  wealth,  276-278,  314, 
but  outlasts  that  from  produc- 
tion, 308-312 ;  the  denominator 
of,  250-256 ;  land  and,  240,  255- 
256,  265-266 ;  slavery  and,  258- 


259,  263;  not  a  relation  to  an 
intrinsic  quality,  but  to  hu- 
man desire,  251-252,  513,  this 
idea  of,  at  bottom  of  the  Aus- 
trian school,  218,  252;  but 
measure  of,  must  be  objec- 
tive, 252-253;  labor  the  final 
measure,  226-234,  249,  250-254, 
267,  but  money  the  common 
measure,  and  why  labor  cannot 
be,  495-503;  money  the  repre- 
sentative of,  526;  competition 
and,  253-254 ;  confusions  in, 
from  use  of  money,  266-267; 
utility  and  desirability  and, 
214-221 ;  marginal  utilities  and, 
218,  237 ;  special  interests  and, 
273-274. 

Value,  intrinsic,  what  it  is,  221- 
222;  not  necessary  to  money, 
489-490,  491 ;  as  an  element  in 
money,  518-528. 

Vested  rights.  See  Interests, 
Special. 

Vethake,  definition  of  wealth,  122. 

Wages,  Smith's  truth  and  error, 
167,  174,  233;  law  of,  and 
"Progress  and  Poverty,"  202; 
origin  and  nature  of,  233 ;  cur- 
rent doctrine  of,  333 ;  value  of 
labor,  240;  one  of  the  three 
great  laws  of  distribution,  444 ; 
futile  attempt  to  regulate,  445. 

Wakefield,  Edward  Gibbon,  per- 
version of  natural  rights.  187- 
188. 

Walker,  Francis  A.,  looseness  as 
a  statistician,  120w./  definition 
of  wealth,  123,  278n.;  alleged 
law  of  diminishing  returns  in 
agriculture,  335. 

Wants,  how  distinguished  from 
other  human  desires,  82-83, 247 ; 
order  of,  85. 

War,increasedvalues  attending  it 
not  to  general  interest,  268-269. 

Wealth,  primary  term  of  political 
economy,  117 ;  its  object-noun, 
127,  181,  301 ;  origin  of  the  eco- 
nomic term,  118 ;  common  mean- 
ing of  the  word,  117-119,  140; 


INDEX. 


545 


danger  of  using  it  in  this  mean- 
ing, 280-284;  confusions  as  to 
its  economic  meaning,  115, 117- 
130,  176-177,  181,  210 ;  Whately 
on  one  of  its  ambiguities,  141 ; 
definition  of,  by  economic 
writers  since  Smith,  121-127, 
278w.;  failure  of  the  scholastic 
economists,  203-204,  one  of  the 
latest  scholastic  conceptions  of, 
127,  real  difficulty  that  besets 
their  formulation  of  a  true  def- 
inition, xxxiii.-xxxv.,  131-142, 
167-169,  273-274;  Aristotle's 
definition,  132 ;  Ulpian's  defini- 
tion, 132;  ineffectual  gropings 
towards  a  determination  of,  182- 
197 ;  Smith's  meaning  of,  120, 
143-147,  164-165,  229-230,  279- 
280,  yet  he  is  not  altogether 
clear,  183,  210,  271,  279;  Physi- 
ocrats' clear  understanding  of, 
149,  158,  164-165;  different 
method  from  that  used  in 
"  Progress  and  Poverty"  in  fix- 
ing meanuig,  270-272 ;  the  true 
meaning  in  political  economy, 
270-284;  proper  definition  of, 
270-271,  272,  276,  279,  287-288, 
293,  296,  340,  357 ;  what  is  meant 
by  increase  of,  278-279;  genesis 
of,  285-292 ;  though  it  proceeds 
from  exertion,  all  exertion  does 
not  result  in,  285-287,  nor  yet 
can  the  idea  be  reduced  to  that 
of  satisfaction,  289 ;  its  essen- 
tial character,  288,  289-292,  295, 
301;  why  political  economy 
does  not  consider  all  satisfac- 
tions, but  only  wealth,  301-303 ; 
"actual"  and  " relative,"  282; 
it  comes  solely  from  produc- 
tion, 272,  which  is  checked  by 
slavery,  393,  and  increased  by 
cooperation,  399-401 ;  econo- 
mists agree  that  all,  has  value, 
210 ;  its  value  comes  from  pro- 
duction, 272;  the  value  from 
obligation  relates  only  to  the 
distribution  of,  272 ;  its  produc- 
tion involves  space  and  time, 
340,  357-370;  money  con- 


founded with,  493w./  that  which 
is  called  capital,  293-300;  all 
capital  is,  294-295,  296 ;  not  con- 
sidered after  distribution,  427- 
428 ;  no  single  word  in  English 
to  express  the  idea  of  an  arti- 
cle of,  282;  use  of  the  word 
commodity,  282  ;  and  of  good, 
282-284 ;  desire  for,  is  legitimate 
in  political  economy,  304 ;  moral 
confusions  as  to,  304-307 ;  per- 
manence of,  308-312;  labor 
the  only  producer  of,  415 ;  why 
generally  regarded  as  sordid 
and  mean,  305-307;  that  part 
called  capital,  293-300,  413; 
land  not,  257-269,  277-278; 
other  spurious  wealth,  137,  257- 
269,  276-282, 296-297, 299rc.,  313- 
314;  some  money  is,  some  is 
not,  299w.,  313-314. 

"  Wealth  of  Nations,"  its  impor- 
tance as  a  book,  89;  comparison 
with  "Progress  and  Poverty," 
120w.;  what  it  accomplished, 
170-173 ;  its  illogical  character, 
182-183. 

Whately,  Archbishop,  catallactic- 
as  substitute  name  for  political 
economy,  128-129 ;  ambiguities 
of  the  word  wealth,  141. 

Wieser,  teachings  of  Austrian 
school,  208-209. 

Will,  included  in  the  element  of 
the  world  called  spirit,  9-10,  77, 
88;  in  man,  10,  47,  309;  causal 
relations,  48-51;  that  behind 
nature's  laws  superior  to  that  in 
man,  51-57, 59-60, 80, 444 ;  place 
of  human,  in  political  economy, 
76,  79-80;  good  and  evil  not  in 
external  things,  but  in,  91; 
original  meaning  of  distribution 
and,  434-437;  natural  laws  of 
distribution  and,  437-438 ;  right 
or  justice,  ought  or  duty  and,  452. 

World,  the  three  factors  or  ele- 
ments of,  9-10,  47,  77,  80;  its 
origin,  10,  79,  367,  403. 

Wrong,  no  business  of  political 
economy  to  explain  difference 
between  right  and,  73. 


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